TRANSCRIPT OF THE NOVEMBER 20, 2001 ADVANCED ENGINE TECHNOLOGIES, INC. ANNUAL SHAREHOLDER MEETING
Los Angeles Airport Hilton Hotel, Los Angeles and Carroll Shelby Enerprises, Gardina, California
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.
TRANSCRIPT
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.
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.
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.
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?
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.
Mr. Chairman, I move that we waive the reading and approval the minutes.
John Luft:
Ok, thank you. Do we have a second?
Ok, thank you. Do we have a second?
Floor:
I second.
I second.
John Luft:
OK, all in favor say "aye"?
OK, all in favor say "aye"?
Floor:
[unanimous approval]
[unanimous approval]
John Luft:
All opposed?
All opposed?
Floor:
[no response]
[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.
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.
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.
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.
Mr. Chairman, I nominate for election as directors these five persons you just named.
John Luft:
Is there a second?
Is there a second?
Floor:
I second.
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.
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.
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?
OK, do we have a second?
Floor:
I second.
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?
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.
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.
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.
Mr. Chairman, I move that the meeting be adjourned.
John Luft:
Thank you. Is there a second?
Thank you. Is there a second?
Floor:
I second.
I second.
John Luft:
All those in favor, say "aye"?
All those in favor, say "aye"?
Floor:
[unanimous agreement]
[unanimous agreement]
John Luft:
All opposed?
All opposed?
Floor:
[no response]
[no response]
John Luft:
The motion has been carried, and the meeting is adjourned.
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.
OK, yes sir.
Questioner 1:
What happened to the testing at Riverside?
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?
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... ?
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.
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.
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.
Thank you, Neil.
Questioner 2:
I've got a whole bunch of them if you want me to just go on...
I've got a whole bunch of them if you want me to just go on...
John Luft:
Yes, go ahead.
Yes, go ahead.
Questioner 2:
What, if SRI is not going to get intellectual property rights, what's their reward in helping you?
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.
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?
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?
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...
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.
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.
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?
Could I just say a word?
John Luft:
Yes, Carroll.
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.
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?
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.
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?
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.
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?
You weren’t there were you, Paul [Davenport], for that?
Paul Davenport:
I built the stand that the original engine set on.
I built the stand that the original engine set on.
Carroll Shelby:
You did? Were you there for what he is talking about?
You did? Were you there for what he is talking about?
Paul Davenport:
Yes.
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?
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.
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?
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.
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?
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)
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.
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.
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.
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.
That's correct.
Questioner 4:
Is that to mean that everything that is done at Shelby's is free?
Is that to mean that everything that is done at Shelby's is free?
Carroll Shelby:
No, they paid for those dynos.
No, they paid for those dynos.
John Luft:
We pay rent. We don’t pay by the hour.
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.
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?
Where is SRI located? Are they here in Los Angeles?
John Luft:
They're in San Francisco area.
They're in San Francisco area.
Carroll Shelby:
Up in the Bay area.
Up in the Bay area.
Questioner 5:
So if you make the agreement, the engine will go up there?
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.
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?
Does everybody know what SRI stands for?
Carroll Shelby:
Stanford Research Institute.
Stanford Research Institute.
John Luft:
Questions? Any additional questions? Yes sir?
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?
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.
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.
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.
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.
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.
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.
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 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.
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...
We're paying the costs now, yes, but we have him tied down now...
Questioner 4:
Is anybody there to watchdog him?
Is anybody there to watchdog him?
Carroll Shelby:
Absolutely.
Absolutely.
John Luft:
Yes we have one of our Board of Directors who is located in the Gold Coast who...
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...
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.
Yeah.
Carroll Shelby:
...who is a man of high integrity. And he watches him, and he bird dogs him.
John Luft:
Every week.
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.
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?
Yes sir?
Questioner 8:
It's been no mention about how long the engine runs now. What's the longest it's running?
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?
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.
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?
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?
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.
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.
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?
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.
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?
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.
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.
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.
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?
And it starts by turning, giving it electricity, turning a key or?
Steve Wells:
Yeah, what... we've got a Motec fuel injection system...
Yeah, what... we've got a Motec fuel injection system...
Questioner 8:
And how does it turn on?
And how does it turn on?
Steve Wells:
Just the same as your car does. Just push a button.
Just the same as your car does. Just push a button.
Questioner 8:
So you make contact and it starts?
So you make contact and it starts?
Steve Wells:
It starts.
It starts.
Carroll Shelby:
You going down there to watch it run?
You going down there to watch it run?
Questioner 8:
Oh yeah.
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.
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.
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.
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.
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?
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.
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?
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.
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.
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?
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...
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.
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.
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?
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.
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.
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."
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.
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.
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?
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.
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.
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?
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.
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?
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.
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?
OK?
Questioner 10:
What do you think will be the first commercial application for this?
What do you think will be the first commercial application for this?
Carroll Shelby:
Generator.
Generator.
Questioner 10:
What size?
What size?
Carroll Shelby:
25 or 30 kw. Something somebody might use in their house.
25 or 30 kw. Something somebody might use in their house.
John Luft:
OK, yes sir?
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...
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.
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.
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.
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...
I understand that, but...
Carroll Shelby:
I don’t know what you want.
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.
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?
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...
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.
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.
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?
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.
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.
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.
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?
Yes sir?
Questioner 12:
Do any of the members of the board read the Yahoo! message board for AET?
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.
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?
What was the question?
John Luft:
If the board members read the Yahoo! chat room.
If the board members read the Yahoo! chat room.
Alexandria Phillips:
Sometimes, yeah.
Sometimes, yeah.
Carroll Shelby:
I can’t turn a computer on.
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.
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.
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?
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.
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.
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.
Thank you.
John Luft:
Very good. Thank you.
Very good. Thank you.
END OF TRANSCRIPT
The meeting is adjourned, and all are invited to a demonstration of a running OX2 engine at Carroll Shelby Enterprises in Gardena, CA.
Neil Cummings, Carroll Shelby, John Luft
Steve Wells at the Dyno Panel with Paul Davenport Looking On
The Dyno Console
The OX2 on the Dyno
Side view
Instrumentation Detail
End View
The Second Dyno Testing Room
