TRANSCRIPT OF THE NOVEMBER
20, 2001 ADVANCED ENGINE TECHNOLOGIES, INC. ANNUAL SHAREHOLDER
MEETING
On November 20, 2001, the Annual
Shareholder Meeting of Advanced Engine Technologies, Inc. was held at the Los
Angeles Airport Hilton Hotel at 10:00 am. Following the meeting, all were
invited to attend a demonstration of the OX2 engine running at the facilities of
Carroll Shelby Enterprises on S. Figueroa St. in Gardena, California. In
attendance at the meeting were director and president Carroll Shelby, director
and treasurer Alexandria Phillips, secretary and legal counsel Neil Cummings,
Steve Wells, an engineering technician who would be running the OX2 at the
demonstration, and, officiating the meeting, John Luft, vice president of
marketing development and acting COO. Not present were directors Richard
Ronzi, Noel Holmes, and Steven Manthey, the OX2 inventor. 18 shareholders
signed-in who, along with their guests for a total of just over 20, also
attended. Paul Davenport, a shareholder and former AET engineer, was among
them.
In the official portion of the
meeting, all existing directors were re-elected to the Board of Directors and
Singer Lewak Greenbaum & Goldstein LLP were ratified as AET's independent
public auditor. Following the official business, John Luft presented an
update on AET's past year's and future progress. A question and answer
period then followed.
This transcript is as accurate and
verbatim as possible. Only minor editting was performed, eliminating a few
irrelevent meeting interruptions and omitting a very small amount of inaudible
discussion.
Some statements critical of Steven
Manthey's behavior and past performance in delivering on his AET contractual
obligations were made at the meeting. It was debated whether it was
appropriate to include these comments in this transcript. The statements
are included and are uneditted. It was decided that Steven Manthey is, no
doubt, already aware of these criticisms and his short-comings. It is
hoped that Mr. Manthey will accept this criticism as a challenge and an
opportunity to redeem himself in the eyes of AET and its shareholders by
fulfilling and meeting his obligations and goals under his new AET
agreement.
Carroll
Shelby:
Welcome to the AET Annual Shareholder Meeting. I'm
going to turn the meeting over to the Chief Operating Officer, John Luft, and
Neil Cummings, our attorney. And then I'll be around to answer questions
when the meeting's over.
John Luft:
I
want to welcome everyone here, and it’s been a long year since many of you have
met last time at a shareholder meeting. As Carroll mentioned, Neil will be
driving the shareholder meeting and will be acting as secretary of the
corporation. I have, to my left, Alexandria Phillips, member of board of
directors and treasurer of the company. Noel Holmes who is a director was
unable to attend due to illness. Steven Manthey who is a new director by
unanimous written consent has been placed on the board. Steven is
feverishly working on a set of goals and objectives that we have laid out before
him. They are all goal driven tactical objectives to get this engine
commercialized. He said if he had to fly over here it may put him behind
schedule. And I don’t know about anyone else in this room, but I don’t
want him behind schedule. So Steven has opted to remain in Australia and
work on the engine. Dick Ronzi is not in attendance as well. Dick had an illness
that was called Wegeners, of all things, something I never heard of, but it
affected his circulation and his doctor said that 'til, uh... He’s back
swinging his golf club, which is probably the good news. The bad news is
Dick is not here. We all wish Dick well in having a full recovery. Let's
see... I believe that's it for the directors.
To give you an outline, we are going to
conduct the formal part of the meeting first. We will provide... we will
be voting and ratifying a couple of points in the formal session of this annual
shareholder meeting. We will then close the formal shareholder meeting,
and we will provide an informal update. That update will include a variety
of topics that include engine progress, company progress, and a variety of
things that we'd be happy to discuss. At the close of this we will
provide, to any of those who would like to attend, a running of the
engine. We have two engines on dynos right now, and we have maps at the
back table and would welcome anybody who would like to come down and listen to
that engine run... watch how it performs... look at the readings on the
dynamometer... just about anything you want to do. Steven Wells, who is
our developmental engineer... Steven is in the back of the room... thank you for
attending, Steve. Steve will be there to answer questions on the company’s
behalf. Hopefully when you leave here today you will all feel very good
about the fact that we've gained a lot of progress, and there is a tremendous
amount of hope for this thing. So I would like to let Mr. Cummings take
care of some meeting formalities, and then we'll proceed with the formal portion
of the meeting.
Neil
Cummings:
Thank you, John. I am going to take care of the real
exciting stuff, so hold onto your seats. The company has received an
affidavit mailing indicating that notes of this meeting together with a proxy
statement and proxy card were mailed to each holder of record of the company’s
common stock at the close of business on October 24, 2001. Copies of the
notice of the meeting and the affidavit of the mailing will be filed with the
minutes of this meeting. Lori[sp?] Newman has been appointed as inspector
of elections and has delivered her up to the secretary to be filed with the
minutes. The list of shareholders of the company, as of October 24, 2001,
has been certified by our corporate stock transfer agent and will be open for
inspection during this meeting. Out of the total of 33,455,000 shares of
common stock entitled to vote at this meeting, there are present in person or by
proxy at least 19,650,570 shares of common stock or 58.7% of such outstanding
shares. Accordingly, I declare that this meeting has been duly called,
that a quorum is present, and the meeting is lawfully convened for the
transaction of business for which it was called.
John
Luft:
Very good. So let me just tell you what the attorney
just said. We can conduct formal business because we have a quorum. OK, we
are going to start by, ah... basically, the first order of business is to
approve the minutes of the last shareholder meeting. This meeting was held
December 28, 2000, actually held in this hotel. Unless the reading of the
minutes and approval is waived... these minutes are available for review by any
shareholder, in fact, on the back table, they can be reviewed at any time.
Then you can actually take your time and look through those minutes upon the
adjourning of our formal meeting. Do we have a motion to waive the reading
and approval of the last minutes?
Floor:
Mr.
Chairman, I move that we waive the reading and approval the
minutes.
John
Luft:
Ok, thank you. Do we have a second?
Floor:
I
second.
John
Luft:
OK, all in favor say "aye"?
Floor:
[unanimous approval]
John
Luft:
All opposed?
Floor:
[no
response]
John
Luft:
Motion passed. We got through that one. Next
one. We’ve got really two items of business we are going to deal with
today or conduct today. Basically, they are very simple. We’ll have
election of five directors and a ratification of the independent audit.
Now before voting I would like Neil to explain the voting procedures to
everybody.
Neil
Cummings:
Just imagine this is the Academy Awards and I am Price
Waterhouse, you know I'm talking about counting the ballots. If you have
returned your proxy card, your shares will be voted in accordance with your
instructions unless you wish to change your vote at this time. If you are
holding a proxy card and wish to have it recorded, please raise your hand so we
can give it to the inspector of elections now. If you wish to vote in
person and do not have a ballot, please raise your hand at this time. We
have Mr. Davenport. Anyone else? OK.
John
Luft:
Thank you Neil. The polls are now open. We are going to
present both items on the agenda, and then, after any discussion, we will vote
on both proposals. Now I ask that your restrict your questions and
comments, at this time, to the items being voted upon. We will have
general questions later and in particular during the informal
presentation. There we will address all questions pertaining to the engine
and progress, and any other question you may have. First item on the agenda is
the election of the directors. Five directors are to be elected, each to hold
office until the next annual shareholder meeting, or until his or her successor
is elected and qualified. Management has nominated the five current
directors of the company. The nominees are Noel Holmes, Steven Charles Manthey,
Alexandria Phillips, Richard Ronzi, and Carroll Shelby. I now ask that these
persons be placed in nomination.
Floor:
Mr.
Chairman, I nominate for election as directors these five persons you just
named.
John Luft:
Is
there a second?
Floor:
I
second.
John
Luft:
OK. If there is no other nominations, I declare the
nominations closed, and the ratification of independent public audits will be
next. The last item pertains to Singer, Lewack, Greenbaum and Goldstein,
LLP as independent public auditors for the fiscal year ending June 30,
2001. A motion would be in order.
Floor:
Mr.
Chairman, I move that the appointment of Singer, Lewack, Greenbaum and
Goldstein, LLP as the company's independent public auditor for fiscal year
ending June 30, 2001 be ratified.
John
Luft:
OK, do we have a second?
Floor:
I
second.
John
Luft:
OK. Any discussion at this time pertaining to these two
items? OK. If you are voting in person, please mark your ballots
with respect to the election of directors and ratification of auditors.
When you are finished please raise your hand so that we can collect the ballots.
Anybody that is voting in person, please raise your hand. Nobody
else? OK. The polls are now closed. Will the inspector please
collect all the ballots and prepare the certificate of voting and advise Mr.
Cummings of the results of the vote?
Neil
Cummings:
The inspector's certificate indicates that each nominee
has been elected as director of the company and the appointment of independent
auditors has been ratified.
John Luft:
So
I hereby declare that Noel Holmes, Steven Charles Manthey, Alexandria Phillips,
Richard Ronzi, and Carroll Shelby have been duly elected as a director of the
company, and the appointment of Singer, Lewack, Greenbaum and Goldstein, LLP as
the company’s independent auditors for the fiscal year ended, June 30, 2001, has
been ratified. We are now concluded with the formal portion of this
meeting. I will entertain a motion to adjourn.
Floor:
Mr.
Chairman, I move that the meeting be adjourned.
John
Luft:
Thank you. Is there a second?
Floor:
I
second.
John
Luft:
All those in favor, say "aye"?
Floor:
[unanimous agreement]
John
Luft:
All opposed?
Floor:
[no
response]
John
Luft:
The motion has been carried, and the meeting is
adjourned.
Well, now we're on the informal part of
the meeting. I thank everyone of you for being here. You know in the
next few minutes we're going to take you through some information, updates on
progress. We’ll talk about some of the "blocking and tackling" that we are
doing that often are not newsworthy but are necessary steps and sometimes very
painful. The development is rpm at a time, and sometimes the rpms do not
come as quickly as we would like. But those that have been involved in
this from the very beginning feel like the engine has probably reached its most
performance driven level in its history. We’ve gained more progress.
We’ve really gone through that painful rpm by rpm, and we anticipate some real
performance milestones in the next twelve months. I hope that the most
painful part is over, and we will be able to begin sharing with you all the
successes and the triumphs that we gain by working on this thing, showing up
every day focused on getting it done. So let's go ahead and get
started.
AET's annual shareholders meeting, this
is the informal update. The topics we’ll very quickly discuss today, one
was that we took care of the formal aspects of our meeting, the election of
board of directors and the ratification of the audit. We will move down
towards the bottom of the topics of discussion and provide an AET update, talk
about what the company's doing, progress we are making as a company. And
then we'll discuss the OX2 development and how we are progressing and open for
discussion.
The basic AET organizational chart is
as follows: Carroll Shelby is president. As you can see, I am
operating as the day to day chief operating officer. Neil Cummings is
secretary of the company. Alexandria Phillips, treasurer. The BOD
consists of Carroll Shelby, Noel Holmes, Alexandria Phillips, Richard Ronzi,
and, now, Steven Manthey. We are supported by finance and accounting, and
I want to welcome Lori[sp?] Newman in attendance. Lori is one our
individuals at the back table who go through the painful process of dotting the
"i"s and crossing the "t"s, and making sure that our day to day business is
taken care of in the manner that it should. We also, as mentioned, have
Neil Cummings as secretary. Neil also represents us as corporate counsel,
and his support staff supports the company very well. The fact is that
many of you are unaware of some of the very difficult aspects that we manage on
a day to day basis. It's our job to insure that you don’t have to go
through the pain. It's no easy thing to try to manage the lawsuit between
the inventor and his partner. It's no easy thing to try to keep the
company harmless in those kinds of conflicts, protect the shareholder value, and
insure that our patents are protected, and every aspect of our business.
So it's a very difficult process, and each of those you see on the org charts
supports the company on a day to day basis. I don’t know how they did
it. I’ve only been here one year. I don’t know who answered all the
calls that I now answer. I don’t know who fielded all the issues and dealt
with all the business matters that I now deal with. I have no idea.
I'm guessing between Carroll and Neil and everybody else, they were like that
proverbial one armed paper hanger. So I have a great admiration for all
the work that they did prior to me joining the company.
On a corporate level we have taken a
couple of steps towards the commercialization of the product. You know the
product is only one half of the equation. Part of success in any product
is branding and its positioning in the market. You know many brands have
done it very successfully... brands that you know, whether it's the sign on this
building called "Hilton" or whether it’s that big yellow earth mover called
"Caterpillar". The fact is that companies that have products in the market
spend money, spend time, spend effort, building brand, because at the end of the
day the brand is often what is selected to drive the buying decision.
We're all here to see this OX2 engine reach a point where the customer base or
market segment selects and buys the OX2 product for their general
application. So we’ve strived in establishing that. These are very
simple blocking and tackling issues, but a professional corporation has to have
a corporate identity. We’ve gone through the process and have come up with
Advanced Engine Technology as you can see there, that is now the corporate
logo. I have a card here for any of those that would like to look at it
close up. Again, the intent here is to build corporate identity, to build
corporate loyalty, with AET as the corporate entity. Behind that though,
AET could feasibly have a number of brands or products within its corporate
structure. The one we know and love today is the OX2 engine. Again,
OX2 requires, must have, some kind of product identity, because we're all here
to take this engine to the market. And when we take it to market, every
time we present this engine in the public marketplace, every time they see this
logo, it will build brand identity, build brand awareness, and aid us in the
actual revenue aspect of this company. So these are the two OX2 [logo]
examples on screen. And as you can see there, there is an actual bordered
up copy of it for your review after the meeting. This is just a general
idea of how it looks. Again this is a professional company, conducting
professional business, and again these are just blocking and tackling
moves.
Secondly, we have gone live with
ox2engine.com. Previously we had a site, and I'll just be very frank with
you. We had a site called, I can't even remember what it was right now...
oxtwo.com. This was developed by an employee of the company, and the
company supported the development and basically took care of the hosting
responsibilities... everything you do when building a website. When this
person left the company, they chose to have some of these things changed to
their own personal name, and then offered our website back to us for a
fee. You know what, our responsibility is to avoid those kind of
efforts. It's disheartening when you pay an employee to develop, and then
they think that they should have a right to lease it back to you. Not a
good use of this company’s money, and so the right thing to do was to very
quickly get out there and develop a website. Now for those that were aware
of oxtwo.com in the past, and then ox2engine.com, the websites are worlds
apart. This is a professionally managed site. The information, the
detail, all of it is very professionally done, and is kept current with press
releases and all other information. Our website should provide you with a
one stop shop capability to access a number of things. As you can see
here, there always will be current press releases and any articles
published. You can click on the site, engine details and exploded views,
as I'm sure many of you have seen. Financial information, we provide links
for all of our "Q"s and our "K"s [SEC 10K's and 10Q's]. So that again, any
time you as a shareholder have a question about the financial reporting of this
company, you can one stop shop that at ox2engine.com. So let's get right
to it. That was a corporate update. Let's talk about the
engine. I'm sure everybody is interested in that.
You know, to many of you, I noticed
that many of you were crowded around the cutaway [model of the OX2]. You
probably know more about this engine than maybe even many of those up here at
the table. But for those that are unfamiliar with the technology, this is
an exploded view of how the engine is diagrammed. Here are some
photographs of the engine in one of the engine testrooms. You may be aware
that we have completed a second engine test room. We have a second engine
on a dynamometer. The intent behind developing two engine test rooms is
very simple, we get twice as much done. That's an easy thing to
understand. As we test one engine for performance, to gain optimization in
everything from volumetric efficiency to the optimization of the fuel and
emissions systems, we can concurrently test the second engine for endurance
because, as Carroll has mentioned time after time, industry requirements are
that you have got to have a continuous 100 hour run time on an engine as one of
the final steps in its ultimate commercialization. So this provides us
with the capability to be concurrently testing both avenues and speeding up the
process. To no surprise, I'd like to echo what we said in our last annual
shareholder meeting, and, as we stand today, we think that the absolute logical
point of entry for this product is stationary engines. It’s
gen-sets, it's commercial applications in pumps and industry. It is very
timely. When you look across any major city skyline, any time you see a
high rise building, you must know that on the top of that building is
supplemental power generators. As we’ve gone through a very tenuous time
with power restrictions and rolling blackouts throughout California, it became
more aware than ever before the need for supplemental power, secondary power,
and a non-reliance on natural resources because often they become strained
through whatever occurs often in the middleeast. So our engine supports
the fact that we become self-sufficient in our own resources, and we think it
was very timely and a very wise choice to choose gen-sets and stationary engines
as the point of entry for this product. Obviously, I think it is no
surprise as well, there is a natural application for the OX2 for marine
use. Again to no surprise, hybrid vehicles. You know hybrid vehicles
will be a very longterm strategy. But, simply put, a hybrid is an electric
car with an on board gen-set. It makes sense to enter the market with that
gen-set, develop our core competency with that gen-set.
And, as Carroll has said time after
time, we don’t go to the "Big Three". We put a product in the market, and
we have them come to us. Part of that responsibility is to protect our
intellectual properties, all of you as shareholders. We've had, time after
time, opportunity to align with any one of the Big Three auto makers. GM
in particular, who we are currently under a letter of intent, has voiced
interest in us bringing our entire program up to Detroit. But the fact is
that as they assist, and they would assist in the development, they would own
the intellectual property. These big companies sign no
non-disclosure agreement, and they file any time there's an improvement.
They file the intellectual property as their ownership right. And very
quickly we could not have the intellectual properties and the product and the
secured patent that all of you rely on as shareholders. So this is really
a core reason why we feel like [it's the proper] direction we're moving with
Steven Manthey, with local support, and... then we'll discuss some additional
support that we're entertaining at this time. So hybrid vehicles are an
absolute part of the future. And then, of course, any other application in
the marine industry. We've had companies that have voiced interest.
In fact, I know for a fact that Steven, concurrent to our development
requirements from him in Australia, is developing a power head for an outboard
application. So that is going on concurrently along with our needs as
outlined in Steven's agreement.
Additional assistance in providing
engineering and science... Many of you have probably heard... you know
there is a lot of active conversation throughout a variety of chat rooms and the
networked people that stay very plugged into what we're doing. To no
surprise, SRI is a real player that we are negotiating with. For those
that have never had contact with SRI, originally with Stanford Research, but
they spun off as SRI... and they provide a resource, the talent of 900
Ph.D’s which, sometimes that could be troublesome, but I’ve got to believe that
we’ll certainly manage that. But they bring a talent in metallurgy and
science and a discipline that could be very beneficial at the appropriate time
of our development to involve. They have a complete department that
focuses on product development, and, in our preliminary conversations, are very
excited about possibly assisting in the progress that we anticipate
making. Early on we asked SRI to come look at our engine. They came
down. We ran the engine, the one engine we had on the dyno at the
time... we had only one engine test room... and they were very
pleased. I can tell you that their chief engineer, John Heinz[sp?], who is
in charge of internal combustion and product development in internal combustion,
his comments were very, very pointed. He said, "I have never seen a
prototype engine in a prototype stage run as well as this", and he said, "And
secondly, I’ve not seen engineering and the aircraft quality machining that this
engine has" which really speaks to those that have been involved in the engine
to this point and have brought it along. We’re very pleased with
that. We had SRI spend 2 weeks at our facility, running the engine,
talking about a number of things that we feel like are improvements that are
necessary. Then they spent 2 weeks doing competitive analysis, and looking
at the industry, looking at the marketplace. We will proceed with SRI in
negotiating an involvement. We have a responsibility to all of you as
shareholders, though, to protect your interest. SRI, how they operate and
have successfully operated in the past is much like many big companies.
They become involved in your development, you pay them a fee, and they also
claim intellectual property rights as they come up with solutions to improve
engine performance. The BOD at AET had a little heartburn over that.
You know again we get right back into that scenario of not protecting the
interest, the value, which everyone of you must have protected. Fortunate
enough, Neil Cummings and myself have spent a lot of time with SRI negotiating
from their first proposal, and I'm very happy to say that they want to be a part
of this. They really are looking forward to successfully negotiating an
agreement for the sake of participating, and we have successfully negotiated out
any intellectual property ownership on their behalf. They will forgo that
aspect of their agreements 'cause you know they want to be a part of this.
I don’t know if you know SRI’s history, but, just watch the Discovery channel,
you will find that probably once a week SRI is a part of whatever you see on the
Discovery channel on new technology and development. As Carroll often
says, "These people don’t climb on a horse that won’t run." So we're very
excited and we’re anticipating being able to bring those negotiations to
closure, and, at the appropriate time for the company and making sure that the
economics are suited to the company, that we can engage SRI and they can bring
the science and engineering and discipline that will just speed up the
process.
We have entered into a new agreement
with Steven Manthey. For those that may not be aware, Steven Manthey,
prior to this point in his agreement, was in what was called a
"self-development" agreement. Steven, to demonstrate it... Neil, you can
correct me if I am wrong because you were there step by step negotiating it,
but... Steven wanted to demonstrate his commitment to get this engine to
market, so Steven committed to a 2 year agreement where he would fund the
development of the engine. We, uh... at half way through that development
cycle, as many of you may or may not be aware, Steven was involved in very
serious litigation with the estate of his previous partner. It was not a
good time for AET or Steven Manthey because he got his eye off the ball.
When you're fighting attorneys from the estate of his previous partner trying to
basically acquire half of everything that their company had... and there were
other issues that caused Steven to resist that... it required a lot of his
attention, a lot of his time, and a lot of his money for attorneys fees.
The result is that I don’t know that we had Steven's full attention on the
engine. I am very happy to say, though, that Steven and the estate, they
have settled. They are drawing the final papers of that settlement, and,
part of almost a celebration on behalf of the company, we have re-engaged Steven
Manthey in a very aggressive four phase development proposal. Each phase
is very distinct. We have, with the help of Dick Ronzi, who is a member of
our board, who spent 38 years at Ford, headed up research and development at
Ford for many years... Dick, along with SRI and Manthey and our team came up
with what we feel is a comprehensive and aggressive development plan that will
accomplish a number of performance objectives. As you can see on the
screen, we have asked in the first phase for a variety of pieces and parts that
will retrofit the existing engine to improve the engine's performance,
obviously, optimize its insufficiencies, and draw the two engines we have closer
to competitive performance levels. And then as we receive these pieces and
parts that will enable us to retrofit the existing two engines, then from the
key learning of performance improvements, we will subsequently have delivered a
fourth, fifth, and sixth engine to install and cycle.
We have, uh... let me just tell you
that just now we have found a number of engineering areas that we've
improved. For those that are the engineering type in the room, and even
the laymen in the room... I am not an engineer, but certainly I understand
this... we’ve found, in flowing the engine, we found air flow restrictions,
found where it was being restricted, changed the inner block casting, in the
pattern, and re-cast blocks. We expect a 20% improvement because, simply
put, it's no different than if you walk down this hall and hold your hand over
your mouth. You can probably breathe and successfully walk.
But if you were asked to run down that hall with your hand over your mouth, you
would require more air because you are exerting more energy. But with the
restriction of your hand you would probably be unable to do that. And that
is what we were having with the engine. As we would advance in rpm, the
engine would not have enough air to breathe. We have identified that and
corrected it and the blocks are being machined now and Steven Wells will be
retrofitting those and we really are excited about that change. Secondly,
we've had great success with fuel optimization. We are currently using a
Motec fuel and ignition system. It's one of the state of the art systems,
actually, in the world. That’s the good news. The bad
news is, because it is state of the art, there's only about one person that
works on it in the state of California. So as we need attention for
optimization, we often have to enter in the queue, and when our name comes up,
then he is able to come pay a visit. We have found an alternate
source. That has made all the difference in the world. Engine number
2 has been successfully optimized. We've increased... and Steve [Wells]
correct me if I am wrong... but, as reported, just by fuel optimization and fuel
mapping, with this different resource, we have gained another 15 to 20 foot
pounds of torque at the same rpm level. So that's exciting because that's
optimization technology we currently have. So we've gained strides in
those areas. Again, this is rpm at a time. And at times we often
wrestle with, "do you put out a press release saying we optimized the
fuel?" It's always a struggle. I could tell you we have... our PR
agency continues to keep us in check. We can’t use the PR agency or the
press as a "cry wolf." Then when you put out information, you have meat,
and then as you produce meaty information to the market, then you gain pickup by
publications. If we are announcing every time we gain 15 foot pounds, it
becomes a "cry wolf" scenario and they start paying less attention to you.
So it's a very delicate balance. So that is the progress we have made so
far. We have maps on the back table. Steven Wells, the development
engineer, will be running the engine for any shareholder that would like to see
the OX2 run. It's pretty exciting, and I recommend, everyone of you,
if you can, to please join us down there. At this time I will open the
floor for any informal discussion you may have, any questions you may have for
any of the officers or directors.
OK, yes sir.
Questioner
1:
What happened to the testing at Riverside?
John Luft:
You know Riverside... UCR is still active in our test
program. Let me just say that in lenghthy discussion with Dr. Norbeck,
they admit that early on they were a part of the program to aid in the testing
and development. Dr. Norbeck clearly admits... he says, "You know we are
not capable of providing the development support that you probably need on this
engine." That's why he was very excited when he heard we were talking with
SRI. UCR is a tremendous testing facility. Understand that every
time that we take the engine down there for testing, the meter's running and we
pay. So, in fact, we have the same equipment in our test facility that
they do. So we're going to use UCR for two basic aspects. One is
validation testing. As we gain a performance level that is competitive
that we're prepared to publish those numbers, we will ask UCR to drop the OX2 on
their dynamometer, and validate those numbers. Secondly, towards the end
of our development cycle, UCR, one of their tremendous core competencies is
emissions testing. They have one of the most state of the art emission
testing facilities in the nation. And as we move towards the sundown of
our development and eventual commercialization of the OX2, we will ask UCR to
assist us in the environmental and emissions testing part of it. Any other
questions? Yes sir?
Questioner
2:
Could somebody explain in layman's terms what the status of this
lawsuit is? Is it pretty much put to bed or... ?
John
Luft:
Let me ask Neil to answer that.
Neil
Cummings:
It's pretty much put to bed. The lawsuit... the two
lawsuits, one in New Mexico and one in L.A.... there are also lawsuits in
Australia... but my understanding is that all the lawsuits have been
resolved. I’ve actually seen dismissals as to AET. So AET has no
exposure in those lawsuits. They have been dismissed as to AET.
There are a couple of issues that still need to be resolved between the parties,
meaning the Ebbage estate and the Steven Manthey engine's interest. I
believe they've agreed to a division or a distribution of the shares in dispute,
and the shares in dispute are, in fact, still on deposit
with the court in
Los Angeles. Once those parties have written agreement on how they should
be distributed, they will be distributed out to either those parties
individually or their designies. But, fundamentally, the lawsuits
have been resolved as my understanding. I know they've been resolved as
[far as] AET, and my understanding, until final documents are filed with the
court, you can never say that a court action is resolved. But my
understanding is that there is an undisputed, now, agreement between the parties
as to how those shares will be distributed. There's like 10 million
shares on deposit with the court, and those will be divided up among those
parties. When that happens... you know it really depends on when they
produce their agreements in writing.
John
Luft:
Thank you, Neil.
Questioner
2:
I've got a whole bunch of them if you want me to just go
on...
John
Luft:
Yes, go ahead.
Questioner
2:
What, if SRI is not going to get intellectual property rights,
what's their reward in helping you?
John
Luft:
Well, they charge a fee.
Carroll
Shelby:
They charge a huge fee. They might some intellectual
property in the way that if they develop something that works on our engine that
they feel would work on another project of their own, we would certainly license
them to use that or give them the right to use that, and that would be the bone
that we throw them. So that is one of the things that we’re looking at and
talking about with them. We certainly are not trying to cut them out of
anything, we just don’t feel that the shareholders should give up anything now
that in the future might take money out of your pockets or our
pockets.
John
Luft:
And you know to follow up
on what Carroll just said, we are, for the lack of a better term, still
dancing. It's a court dance. It's to all of our best interests that
we're prudent in securing the best deal possible for shareholders that's using
all their [SRI] know-how. And, what's basic, we want to get as much as we
can for as little as possible, and we are absolutely focused on getting that
done. Yes?
Questioner
3:
So how is the company doing financially, how is the money holding
out in terms of your proposed budget towards the research and development?
Are we on track pretty much still?
John
Luft:
Yes we are, in fact, we have drawn our first funds against the
ten million dollar private placement by Mr. Petersen. Because when we have
new blocks, pattern makers who're changing the block charge us fees.
Casting new blocks is obviously a fee. Shipping blocks costs us a
fee...
Carroll
Shelby:
Tell them how much we have drawn against
it.
John Luft:
We have drawn a half million dollars against our ten million dollar
private placement. We can draw at our discretion. And at this point,
like I said, as we step up, we're really getting into the meat of development,
finding flow issues, solving the flow issues, and then taking the
corrections. But with those corrections comes incremental expense.
And so... but if you'll look at our last "K" or even our last "Q" that we just
filed, we are financially strong, and we feel confident that we have the funds
necessary to bring this product to its commercial market. Once we do that
and present it to the market, then hang on.
Carroll
Shelby:
Could I just say a word?
John
Luft:
Yes, Carroll.
Carroll
Shelby:
Here, on what you're saying... As most of you know, I
think that we brought this up before, any of you that are in the room that were
original investors in this thing were really taken to the cleaners. When I
got into this thing nearly four years ago, I was told that we had an engine that
would "do this" and "do that", was more efficient than the present Otto cycle
engines and so forth. What I didn’t know, it was pretty much of a
scam. When I came into this, I later found out after I got involved and
Mr. Petersen became involved, we didn’t have an engine that had run five minutes
without breaking. We had a bunch of promoters that were out telling
everybody that they had something that was a miracle, practically, that would do
anything, and that wasn’t so. And we've spent four years now, and we’re
just now getting to where we're developing the engine to find out the most
important thing of all, "Is it more efficient than present day engines?"
And we've just gotten the instrumentation and are installing it now on our dynos
to be able to monitor that... find out if we are more efficient, and do the
things that we think will make it more efficient. We know the engine will
run. We know a few things about it like it's lighter than a normal Otto
cycle engine. It's lighter. It's smaller. It has applications,
possibly, for the military because you can hold your hand on it after it's been
running for an hour. Try that on some of the other engines. But that
doesn’t mean it's more efficient, and we don’t know if it's more
efficient. We know, theoretically, that it's more efficient, but I still
can’t promise you that, but in three or four months, I’ll be able to tell you
whether it is or not... or we'll be able to tell you. We know it puts out
more torque than a normal engine. We're very involved now to try to get
the rpm up. And all of these things are coming along now, but this is the
first time after four years that I can say we're really moving forward with
development of the engine. We had people that were in this... when they
had an engine that wouldn’t run five minutes, they were in the process of taking
twenty-five million dollars out of this company. And they're still suing,
or threatening to sue, and giving us a hard time. Which they can’t do it
because Mr. Petersen came to our rescue and put the money up. And you
might say, "Why doesn’t he just turn the ten million dollars over
automatically?" He doesn’t do it because he saw these people steal ten or
fifteen million dollars of his money and put it in their pocket. So that's
the reason he's making sure that that doesn’t happen again. So I just
wanted to bring these things up, I think I brought them up before, but I wanted
you to know what I have seen through the four years. If I'd known the
shape we were in, I would have never gotten close to this thing. But, I’ve
stayed with it four years, and Mr. Petersen stayed with it four years.
We're just now moving to where we will be able to tell you whether we really
have something, or not. And we'll always level with you and tell
you.
John
Luft:
Thank you Carroll. In fact, Neil, do you want to comment on
Manthey’s agreement?
Neil
Cummings:
Just to follow on what Mr. Shelby was saying, I’ll keep it
brief, but it falls on what Mr. Shelby's saying about the aggressive nature of
what we are doing with the inventor, and with SRI. We have Steven Manthey
and his company in Australia, on a very focused, tight schedule, for development
of design improvements... and I’m not an engineer so you will have to bear
with me... but, basically, improvements to the engine... areas that Mr. Shelby
and the other experts have recognized are areas that the engine should be
improved. Over the next three or four months, Mr. Manthey and his people
are focusing on that issue... those issues, if you will. Once those issues
are resolved, hopefully that's the three or four month time frame Mr. Shelby is
referring to, then the contract requires Steven Manthey and his company to build
an additional three to four engines, each of which has a different
purpose. Meaning, one of the engines, for example, is to show
durability. The other engine is to show performance. Ideally, the
company will have all these different engines running in the testing facilities
and jumping from one to the other, interacting, interplaying these engines so
that the maximum amount of benefit and development improvement can be attained
in the shortest amount of time. But we're looking at about a year, under
this agreement with Manthey, to really bring this engine forward. So when
Mr. Shelby says "three or four months", he's talking about these design
improvements which we expect will be successfully accomplished, but we're not
sure. And then we're looking at about a year to get three, four, five,
about five engines running. Simultaneously we are negotiating with SRI on
the next level of their involvement. That's where the intellectual
property issue will be fully and finally resolved, and so forth. It's a
balancing act. SRI has got tremendous capabilities, and we respect them,
and, I think, they respect our team as well, and we are confident that we can
reach an agreement. But SRI’s involvement, right now... they are not
actively involved, right today, because we are instead focusing on these design
issues that Mr. Shelby referred to. SRI will be coming back into the
picture in a couple of months, at the right time. That is the right time
for them to come to enter it. But they are very excited about the engine
as Mr. Luft was saying. They are ready to move forward. We got a
good plan, and I think we're implementing it as best we can. I think,
hopefully, there will be some good things coming down in the next four months to
a year.
Carroll
Shelby:
SRI is a wonderful
organization, but they're not, ah... most of the engine development in the world
is done by automobile companies. The reason we can’t do it is because
they'll steal it from you if you take it to them. If you will go back and
look at engines that have been developed outside, practically there is nothing
new in engines since 1890. But if you go back, look at the Wankel
engine. A lot of you guys out there understand that. A German
inventor came up with it. One of the German companies spent a lot of money
trying to develop it. It was sold then to Curtis-Wright and
Studebaker. They spent 50 to 75 million dollars back in the 60’s trying to
develop it. They, in turn, sold it to General Motors who spent hundreds of
millions of dollars back then trying to develop it. It went from them to
Mazda, and they're coming out with a new generation of it, and it's still not an
efficient engine. It still uses a lot of fuel and has inherent sealing
problems. So you understand what a hard, difficult proposition it is to
take something that is new and develop it yourself to the point that you get it
commercial without going through these people who'll steal it from you.
That's what we're up against. There are very few places in the world that you
can go to develop an engine outside of the automobile companies, so that is
That's what's so difficult. There's very few places in the world that you
can go to develop an engine outside of the automobile companies. So that's
what we're up against, and SRI is the best place we have to go right now to work
with the very technical parts of it.
John
Luft:
Thanks Carroll. Any additional
questions?
Questioner
4:
Shelby, just going back a little bit, we first looked at this 6
years ago up in Bakersfield... Roger Maris's place. Then we got on
board.
Caroll
Shelby:
You weren’t there were you, Paul [Davenport], for
that?
Paul
Davenport:
I built the stand that the original engine set
on.
Carroll
Shelby:
You did? Were you there for what he is talking
about?
Paul
Davenport:
Yes.
Questioner
4:
So anyway, we've seen a lot of ups and downs. I’ve got
several questions. One is, Manthey, has he tried to ever go
elsewhere?
Carroll
Shelby:
No, but his partner tried to go elsewhere with the
engine.
Questioner
4:
Now it seems to me that, generally, if you really want something
and you're willing to pay a price... if you got something good, you're willing
to pay a price. Now he said that General Motors is really excited and
wants it, but you're talking about intellectual properties... well, maybe
they can’t get it all... but they’ve got everything there for you, and can do
all the testing. And so if they get half of the intellectual properties,
and put that engine on line, as a car engine, which is the last engine that
anybody ever thought about. When we first saw it, they were talking about
stationary engines, for pumps and oilfield units, water wells, and stuff like
that. Which is a zillion of those out there. Ballard, you got
Ballard up in Canada, working on the electric engines, and whatever, and they’ve
got every car company in the country that have invested money in their
program. And I didn’t hear anything... anybody saying anything about
intellectual properties involved there. So... and you’ve got Ronzi, who's
a Ford guy... I mean you would think that if you really start to think anything
about cars, why wasn't it dropped on Ford. But if GM is really interested,
like he said, I cannot see why you wouldn’t let them have the intellectual
properties as far as cars, or a portion of them, and let them run with
that. Then if they’ve got something, then SRI has got an easier time to
run with something that's been developed through General Motors. Or am I
missing something?
Carroll
Shelby:
Yeah, you're missing something. I’ve dealt with
General Motors. I’ve dealt with Ford. And I’ve dealt with
Chrysler. And I’ve dealt with most of the European companies. And
I’m telling you that 'til you get to the point where you can control the destiny
of a product, which Ballard did before they ever put a contract together with
any of the companies... you're talking about the fuel cell... they'll steal
anything that they can. They're just as crooked as any barrel of snakes
that you ever saw. And they'll try to steal it from you until... you got
to be to the point where you can protect yourself so that you can trade
something off like you say. Just like we're talking about SRI. They
wanted our intellectual property to deal with us. We said, "No, you can’t
have that", but we've come up with a plan that we're putting together... if you
develop something, that you can use in other applications and pay us a royalty
for that, we will give it to you. General Motors is not willing to sign a
secrecy agreement. They are not willing to make any kind of deal with
you. They say, "It's our intellectual property if we take it and develop
it", and we're not going to make a deal with them until... they will sign a
secrecy agreement if they want our engine bad enough. Believe me, they
will come around. They have been known to do that, I don’t know about
General Motors, but I know Ford has, and I know a couple of instances when I was
at Chrysler some things they wanted, they did that. So your point is well
taken and I agree with you in theory, but that's not the way it's worked that
I've seen in the last 40 years of dealing with the automobile
companies.
Questioner
4:
So another year goes by,
another year goes by, another year goes by.
Carroll
Shelby:
Yeah, that’s right. I’m nearly 80 years old, do you think I
want another year to go by?
Questioner
4:
I feel like I’m gaining on you. (laughter)
Carroll
Shelby:
I don’t want another month to go by, and I’ll guarantee you
Robert Petersen, with 24 million dollars in this company at
75 years old and
not in too good of health, all he does is chew my behind out every week.
Let's get it going. Let’s get it going, or get off of it. One or the
other. Don’t drag it out. We’re doing the best we can, and if you
know anybody who can do any better, send them around.
John Luft:
Well, I had Dick Ronzi made a comment to me when he first came on
the board. He said that at Ford, when they brought a product out of
concept, a new engine out of concept, they spent on an average of 9 to 10 years,
and over 100 million dollars before they got it to a point where they would even
look at commercialization.
Questioner
4:
OK, you also said that any time you take an engine out to be
tested out at Riverside, the clock's ticking.
John
Luft:
That's correct.
Questioner
4:
Is that to mean that everything that is done at Shelby's is
free?
Carroll
Shelby:
No, they paid for those dynos.
John Luft:
We
pay rent. We don’t pay by the hour.
Carroll
Shelby:
The situation at Riverside was made by previous
management. They gave them a million shares, and if I had been around to
make that decision, I wouldn’t have gone along with it for the simple reason
that... Dr. Joe Norbeck is one of the smartest guys in the business, and I
respect him greatly. I knew him at Ford before he ever went to the
University. But what they do is not engine development. What they do
mostly is emissions and certification of things that other people bring to them
that they want it certified so it has a status that they can take and sell to
somebody. And that's what they do. They don’t develop like SRI
does. And there's no place that you can go in the world... there is an
English company that I haven’t even told these people that I’m looking at to see
if they might be interested in doing some development for us. I did some
work with them 35 years ago... an ignition system... But that's the reason
we're not doing anything at Riverside now. They're very expensive, and all
they do is certification work.
Questioner
5:
Where is SRI located? Are they here in Los
Angeles?
John
Luft:
They're in San Francisco area.
Carroll
Shelby:
Up in the Bay area.
Questioner
5:
So if you make the agreement, the engine will go up
there?
John
Luft:
Well, actually, in some of our preliminary discussions, they
actually would rather send people down here. We actually have a better
dynamometer engine test facility than they do. They have facilities in
machining and a variety of other resources, but they felt like that they would
rather provide their people down here to utilize our facilities. They felt
like that was the best combination.
Questioner
6:
Does everybody know what SRI stands for?
Carroll
Shelby:
Stanford Research Institute.
John
Luft:
Questions? Any additional questions? Yes
sir?
Questioner
7:
What information do you have... when I stumbled across AET, one
of the gimmicks was this engine would scale. What information do we have
that this engine will scale down to smaller applications like lawnmower engines
or small generators or whatever?
Carroll
Shelby:
There's no reason that it wouldn’t.
John
Luft:
Yeah, SRI has actually given us validation. When they
first came and looked at our engine, one of the comments was how highly
scaleable it is. Fortunate enough that the program that the engine is
developed in... the CAD program... it's called SolidWorks... fortunate enough
that that is the program that SRI exclusively uses. So they very quickly
were able to review the data files and very easily see how they could scale it
up to support a larger application, or scale down for a smaller. That was
a question that we really didn’t solicit, but they voluntarily commented on this
capability of it.
Neil
Cummings:
By the way, I just want to comment. The Board, I
think... the company is very lucky to have Carroll Shelby so involved in the
company and is giving the advice that he's giving this company. I think
most of you know his history. But, you know if you were to single out one
person in this country that is best capable of dealing with the automotive
giants, of making this thing happen on a relative shoestring compared to what it
would cost to develop an engine in Detroit and being successful with it, Carroll
Shelby is the only guy in the country, I think, who could pull this off.
He pulled it off in the 60’s with the Cobra, and it's probably still the
only... He did not pay me to say this by the way.
Carroll
Shelby:
And I wish I hadn't got into it.
Neil
Cummings:
He really... if there's any... and what we're trying
to do here is protect the shareholders because you get one of these companies
involved early on or too early, they'll will to take it over and not pay much
for it. It's very difficult to protect yourself down the road and get
anything for it. Everyone is doing the best that they can with this.
Carroll
Shelby:
We're not the smartest guys in the world, but we're
trying. And everybody in this room should thank their lucky stars that
Robert Petersen has the integrity that he does, because anybody else that I know
that walked into this and saw what had happened before, he would have let the
thing go broke (which it was anyway), take it over, and every shareholder would
have been out, and there was nothing you'd have been able to do about it.
And he said, "No, that's not the way I do business." So you guys are here,
and I am here, thankful for his integrity.
Questioner
4:
Carroll are you happy with Manthey and all the time in
Australia?
Carroll
Shelby:
No, it's a mess all the time and trying to ship stuff back
and forth and trying to run it on schedule, but we’ve got him tied down finally
to where I think that he’s depending on what we're paying him to get by.
He’s having to work harder than he did... which he played around for years
there... you know he didn’t pay much attention
to...
Questioner 4:
But you're also paying the
costs while he's down there.
Carroll
Shelby:
We're paying the costs now, yes, but we have him tied down
now...
Questioner
4:
Is anybody there to watchdog him?
Carroll
Shelby:
Absolutely.
John
Luft:
Yes we have one of our Board of Directors who is located in
the Gold Coast who...
Carroll
Shelby:
He was one of the largest CPA firms down
there...
John
Luft:
Yeah.
Carroll Shelby:
...who
is a man of high integrity. And he watches him, and he bird dogs
him.
John
Luft:
Every week.
Neil
Cummings:
His pay is based upon delivery of the product. It's
not some sort of hourly... you know, just billed by the hour. You deliver
this, you get paid that.
John
Luft:
Yes sir?
Questioner
8:
It's been no mention about how long the engine runs now.
What's the longest it's running?
John
Luft:
How many hours, Steve, do we have on this
engine?
Steve
Wells:
At the moment the engine that's on the dyno has about 20
hours on it.
Questioner
8:
What about in one continuous... started, how long will it
run?
Carroll
Shelby:
We're not going to do that. We're afraid it'll
break. It's the only engine that we’ve got. We would love to do that
as soon as we get some others, as soon as we get another engine from Australia,
which should be here when?
John
Luft:
Well, we're actually getting this first phase, the parts, so
that we can have the third engine running concurrently with engine number
2.
Carroll
Shelby:
Then we go into that phase, and that should be within the
next, I would say, 60 to 90 days. We'll be able to put an engine on the
dyno and run it until it breaks, and be able to put another engine on there when
that breaks and fix it in a very short period of time. I would say that
we're 90 days maximum away from that.
Questioner
8:
But what's the longest time you've had an engine
run?
Steve
Wells:
The longest time we've had one run in one period is about 4
1/2 hours constantly. What we normally do is run an engine for an hour or
two and just keep an eye on things.
Questioner
8:
You don't just turn it on and hope it doesn't break in 5 minutes
and shut it off?
Steve
Wells:
Well, as Carroll said, if we had another 2 or 3 engines at
the moment, that's what we'd like to do.
Carroll
Shelby:
We're just now getting so we can tell you when we can do
that. We haven’t been able to even foresee when we could do that for
sure.
Steve
Wells:
The engine we've got is marvelous. I've been involved
for about a year or so now. With Carroll, it's just about 4 years.
Just over a year ago he asked me to get involved in this project. And I
looked at it, and we've come a long way in a year in the way it runs as far the
fuel consumption and the rest of it goes. We've come a long way.
It's just a pity that 3 years before that we didn't come as far as we could this
year.
Questioner
8:
And it starts by turning, giving it electricity, turning a key
or?
Steve
Wells:
Yeah, what... we've got a Motec fuel injection
system...
Questioner
8:
And how does it turn on?
Steve
Wells:
Just the same as your car does. Just push a
button.
Questioner
8:
So you make contact and it starts?
Steve
Wells:
It starts.
Carroll
Shelby:
You going down there to watch it run?
Questioner
8:
Oh yeah.
Carroll
Shelby:
Good, good, I hope everybody does. There's a lot of
little things that you can’t sit around and contact you every time it comes
along. But, for instance, our Motec injection system costs 1,800 bucks, I
think it is. In my other endeavors and building the cars in Las Vegas, one
of my guys, that is a real computer guy that's cutting our PCM's for us and so
forth, came up and said, "You know, I got a guy that knows more about the Motec
than the guy that you all are using." We had a guy that cost us $500 a
day. He’d come out there and work about 2 hours and charge us $500.
And we found a guy that knows more about it than this guy did, through
him. Now this guy has told us, "You know what", he says, "A Cavalier fuel
injection system will work on this engine better than this Motec system, and it
costs 60 bucks." So that's something that we'll be putting on that over
sometime in the... I don’t know... Steve, you know.
Steve
Wells:
It's something that we're gonna go to. We need a Motec
under a pound.
Caroll
Shelby:
But things like that, I don’t know if that'll work, but
we’ll sure stick it on there. But we got to be prepared, when we make
these changes, to blow an engine up, and have another one that'll go on the
dyno. We haven’t been there. We're just getting there
now.
John
Luft:
Yeah, and of course, understand that prior to this point,
Manthey was under a self-development, self-funding proposal. So now the
company is paying hard dollars for development.
Carroll
Shelby:
We got an engine. It came 18 months ago. It
didn’t run right. Manthey put it together. We sent it back down
there. It was coming back in 3 weeks. It came back in 6
months. It's still not running right. And we finally figured out
why, ourselves, up here. And I think that we will have that engine
running... when Steve?
Steve
Wells:
That is running at the moment. We're making
changes.
Carroll
Shelby:
Thank you, Steve. And this guy [Manthey]... we have
the same problem with it [the engine]. We tell him, "Do one thing at a
time. Don’t go down there and change 5 or 6 things." I’ll be darned if he
didn’t send that engine up here with 5 or 6 changes in it. Isn’t that
right?
Steve
Wells:
Yeah.
Carroll
Shelby:
We’ve got him tied down now, pretty well, because he's
dependent on us for his money now, and Neil has put a contract together where he
doesn’t get paid until he does what we tell him to do. First time we’ve
had that.
Questioner
4:
Go back to General Motors if I may for just a second, would they
be able to steal the whole thing, or half of it?
Carroll
Shelby:
You don’t know what they'll steal. You deal with a
thief...
Questioner 4:
Last time I
checked, Carroll, nothing from nothing is nothing. And, if General Motors,
if you got 30 percent of the whole deal, you'd make a zillion if they did it and
made it work.
Carroll
Shelby:
When they won’t sign a secrecy agreement to work with you,
you can’t deal with them. If they would say, "We're going
to work with
you. We will help you develop it. And we would jointly own it.",
OK. But they won’t do that. They'll say, "We’ll develop it.
We’ll work with you and develop it, but we want all of the intellectual
property." That ain’t going to happen.
Questioner
4:
How about taking the engine to, say, Caterpillar or somebody like
that?
Carroll
Shelby:
We have Caterpillar. We have Kohler. We have
several of them that we're working with, but we've got to get it to the point
where we can’t have it stolen when it goes to somebody.
Questioner
4:
Alright. That's what I want to hear.
Carroll
Shelby:
We have to get it to the point... Ballard had to get their
stuff to the point where the companies needed them more than they needed the
companies. And that's what we... that's the point we have to get to with
this engine. There will be a point where we will say, "Sorry guys, you
lost your money. We lost ours. It doesn’t work."
Questioner
4:
Ballard, they haven’t got anything yet. Auto companies have
put zillions in there. You know that.
Carroll
Shelby:
Fuel cells are, right now, where the automobile industry was
in 1910. There're 500 of them out there, and nobody knows what's going to
work yet. And it will be 20 years before fuel cells are a workable
proposition. So the smartest guys that I know tell me they'll have hybrids
for 20 years before that. General Motors, one of the reasons that they're
interested in this engine is because it'll run on hydrogen. And that is
what their claim is... that they would like to see it used in. I don’t
know whether that's right, or whether they're conning me.
John
Luft:
OK, any other questions? Anyone? Yes
sir?
Questioner
9:
Well, reading between the lines, theoretically this engine's
efficiency should be higher than typical engines today in these
applications.
Carroll
Shelby:
Looks like it might be around 46 or 47[%], developed.
The best Otto cycle engine is the Northstar, about 36 or 37.
Theoretically, we should be better than that, but we ain't.
Questioner
9:
Ok, so you're looking at, like, the restriction in the
airflow. You're looking for where you're missing your efficiency, and
that's what you hope to uncover in the next year?
John
Luft:
That's correct.
Carroll
Shelby:
Absolutely correct. And if I think that we know that
if it is going to get more efficient, if we do these things and it doesn’t get
more efficient, we’ll know what else to do.
Questioner
9:
Now as far as like a 100 hour test on down the line, you're
fairly confident that you can reach those goals. The difficult ones will
be the efficiency goals?
Carroll
Shelby:
I’m pretty sure. I don’t have any doubt that this
engine will run 100 hours at full power. Now we are running at 550 or 600
rpm. We've got to get the rpms up to at least a 1,000 to 1,100.
We've got to increase the torque, and we have to get it to run a 100 hours at
full power about twice as fast as it's running now to get the efficiency up...
to be able to reach an efficiency that gives it an advantage over the...
Unless we, I would make a guess, unless we're 30% better than anything else out
there, it's not going to be a commercial proposition.
John
Luft:
OK?
Questioner
10:
What do you think will be the first commercial application for
this?
Carroll
Shelby:
Generator.
Questioner
10:
What size?
Carroll
Shelby:
25 or 30 kw. Something somebody might use in their
house.
John
Luft:
OK, yes sir?
Questioner
11:
These meetings are wonderfully informative. The problem is
that the rest of the year we get nothing. You mentioned you didn't want to
release alot of stuff and cry "wolf", but over these periods of silence, like,
we didn't know that the motor had broken and what caused the
breakage...
Carroll
Shelby:
We're not going to send out every time a motor
breaks.
Questioner
11:
Yes, but we had a long period, then, when nobody knew
anything.
Carroll
Shelby:
Until we make... until we get... until... I'm not going to
send out something, every time something breaks or doesn’t break on a
motor. And I realize that the problem that you all have is not knowing
what is going on, but we have spent all of our time, it seems like, trying to
work out of this mess of the people that brought it to us, and didn’t have
anything and then got in so many lawsuits with each other. It took most of
our time working with that, and the inventor wasn’t doing the things that we
needed to do to improve the engine. And we've been treading water,
actually, and I think that we pretty well informed you that that's all we're
doing. We don’t have anything to report. We've just been trying to
rescue the company and turn it into a company when it was absolutely
nothing. When I got into this, I thought that it had some potential, and I
found out that it was just a bunch of crooks out there.
Questioner
11:
I understand that, but...
Carroll
Shelby:
I don’t know what you want.
Questioner
11:
If we could have something like a quarterly update of just
general status. There's one thing about crying "wolf", and if we have so
much silence, then we wonder, "What the heck's going on under the table?"
We just need something to keep us someway informed.
Carroll
Shelby:
I don't disagree with you there. I think that you're
entitled to that. You guys want to consider that?
Neil
Cummings:
There's other ways to get information, by the
way...
Carroll
Shelby:
Don’t call John all the time, now, because his phone rings
all the time. Every shareholder out there, thousands of them, call John,
and he, at least, has been answering, but he doesn’t have time to run the
business anymore.
Questioner
11:
I know that. Plus SEC regulations prohibit him from giving
information to single shareholders.
Carroll
Shelby:
Sure. I don’t see anything wrong with us sending a
quarterly report out. Can you, John?
John
Luft:
Well, I tell you what I would prefer. I'd rather not use
the press as the venue. I would... let's make the commitment that we'll
post a quarterly update on our website.
Questioner
11:
That's good.
Caroll
Shelby:
And if something happens, if something major happens, good
or bad, we’ll be able to tell you from now on. But we just haven’t had
anything to tell you because we haven’t known where we were. We couldn’t
get the inventor to cooperate with us. They were all in lawsuits, and I spent
half my time on this thing rather than my businesses that I should be taking
care of. And I've got to get out from under it, too.
John
Luft:
Yes sir?
Questioner
12:
Do any of the members of the board read the Yahoo! message board
for AET?
John
Luft:
You know, I think, I don’t know if any of the board members
read it, at random. I do. I look at it.
Carroll
Shelby:
What was the question?
John Luft:
If
the board members read the Yahoo! chat room.
Alexandria
Phillips:
Sometimes, yeah.
Carroll
Shelby:
I can’t turn a computer on.
John
Luft:
Yeah, and I find that, you know, what's interesting is that
much of the information often becomes disinformation. You know, I would
love, you don’t know how many times I would love to log on and set the record
straight. Then I'd spend my entire day, everyday, setting the record
straight.
Carroll
Shelby:
Do you read that stuff and believe that? There's so much
misinformation in stuff that I get that it might as well be toilet
paper.
John
Luft:
And I would suggest that, any participants in the chat board,
that rather than speculating, call. I could tell you that for those
that I have seen on the chat board, that are first to throw stones, I've never
received a call from any of them. I'd love to. I would definitely
field those calls. Yes sir?
Paul
Davenport:
Some of you in this room know me. Some of you
don’t. Some of you know how long I've been with this company. But I
think one thing I could say to maybe put some minds to rest. For over two
years I was working with AET, was the engineer. I worked here, the
engineer that did all the casting drawings, did all the drawings that you see on
the screen and on your computer. We worked, Steven Manthey and I together,
down under for about a year together. He's the most difficult man I've
ever worked for in my life, and is the reason I resigned from the corporation...
soley. This engine, in my estimation, from people that were involved that
he, Carroll Shelby, alluded to, this engine was never supposed to work. It
is very much like engines and other things that were invented for a scam to put
it in. There were people trying to take this to China, and damn near
succeeded. At the end of the day, when I look at what this engine's
capable of, I have been laughed at by all my friends in Australia and all my
friends here in America, knowing my involvement, that I didn't cash in the stock
I have and walk away from that as well... including my other half, who's
an Australian girl that has continuously told me what a fool I've been.
End of the day, I'm going to tell you something else. Two years of working
on this engine knowing the inside story of where it could go with proper
management, without the lawsuits, without one partner stealing from the other
50% of everything, without the continued non-use of other outside sources to
draw from an engineer's "tech", and technicians and inventors designed and
built. That's the way it is. I know what the price is to go down to
Riverside University and test for one day. It's damn near $2,000, if they
haven't raised it, per day. And they can stretch those days into
weeks. At the end of the day they don't tell you a damned thing. All
they say is, "Yep, it's working. You're right." So until it's
working properly, when you talk about efficiency to get the Northstar engine to
the level, in Cadillac, that it is today, every 1% is millions of dollars to an
auto engine company. 1% to get it into the 30's is unheard of when the
Model-A was like 10%. So when you look at the engineering feat of this
engine if it jumps to in the 40's, it isn't just a fuel efficient engine, it is
the most fuel efficient engine ever created by humans. And for another
reciprocating engine to come to that level is theoretically impossible.
That being said, I can say this. I haven't cashed my stock, and I spent
two years putting notes together. And I resigned because of Steven
Manthey, and it's good to hear that they put him on a regime, because when I was
down there working, a board meeting meant we got our surf boards and went to the
beach. Yes, he's a very difficult man to deal with... extremely. And
unless you realize, that knew Paul Ebbage that died, that 3 days before he died,
was setting beside a computer as I was drawing pictures down there, and I was
basically quarantined to Australia because of it. [Paul Ebbage died from a
meningococcal infection.] At the end of the day, both of them were trying
to steal from each other and a third party in between. You have no idea
how lucky this company is still here. And I attribute it to Carroll
Shelby, as well. His ability to be able to guide this corporation in a
direction to where it isn't stolen by GM, and he is absolutely correct.
Ask a guy who has a [??] patent that got stolen by it. Unless you are
truly complete and you're ready to show that engine to the world signed, sealed,
and delivered, and all the stamps in place, you have nothing other than
something that someone's going to steal. And even in the laws and rules of
the game, if I show you something before it is patented and you do not sign a
non-disclosure agreement, you can go right next door and go build one of the
bloody things and you could patent the darn thing before me and you win.
That, when you're in a continual R&D trail, every step that Steven now makes
that improves one little thing and you say, "Oh man, this is so great.
Look what we did. We changed just a bit.", and GM knows it, and their guys
steal it. And where do they go with it? Well they can build the
whole darn engine just like the bloody thing with that one little change in it,
and by God, it's patented. The exposure that Carroll is protecting us from
is absolute and critical, especially when were so damn close. Now I know
the changes that they're making in the [cylinder] head. I know exactly
what had to be changed from the orginal block because of how many hours I argued
with Steven Manthey. At the end of the day, the engine is very close, and,
with the alterations that you're talking about, you and I have not met yet and I
look forward to that because I was where the buck stopped. And all I can
say is, I'm not cashing my stock. I want to see them go back
up.
Carroll
Shelby:
Thank you, Paul. This guy built four engines under the
old regime that were within 5% of being what the engine should be. He had
nobody helping him. He was having to do it all himself trying to monitor
15 machine shops, a bunch of people that, I'll never know if they were in on the
steal or not with these other people, but Paul just got to the point where he
couldn't deal with Steven Manthey. But he built four engines that were
within 5%. We would be two years ahead if we could have just controlled
Steven Manthey at that time and let Paul do what he wanted to. And I want
to thank Paul for, not what you said, but what you put into this. You put
your heart and soul into it, and I want to thank you.
Paul
Davenport:
Thank you.
John
Luft:
Very good. Thank you.
The meeting is adjourned, and all are
invited to a demonstration of a running OX2 engine at Carroll Shelby Enterprises
in Gardena, CA.