Moller International (fka MLER)

[dcsastry]

Hi Everyone, I'm David Sastry, the new CIO of Freedom Motors.

I know there is a lot of discussion here about Moller International, and the new Freedom Motors plans to raise capital. I have not been on this board in a while, but some folks were concerned about some of the discussion here, about what was factual vs. non-factual information. I'll write a quick update here on the status of Moller International, and what we are doing with Freedom Motors. Things are changing quite quickly at the moment.

So, first I will talk about MI. Currently there no is activity in R&D at MI, and none of our staff are working on aircraft. MI has been in a holding pattern since running out of capital in 2016. However, we have been approached by four investor groups this year (2018) interested in MI technology, all from APAC region countries. Two of them we have met with, one from China gave us an offer of mixed ownership which was rejected. The second investor is a multi-national company ($250 billion market cap), and they are still working on an offer to present to us. We have two more investment groups coming to visit and we will release more information when we are able.

Freedom Motors is far more interesting, because we are working on funding plans right now to bring a Rotapower biogas/APG gen-set to market, which we believe will have a major impact on the market, because the cost to customers is 1/3 the price of the lowest-cost existing solutions. There is a big push by governments, states and other organizations to reduce methane emissions and methane flaring. California has passed a law (SB1383) that requires a 40% reduction in state methane emissions by 2030 (from 2013 emission levels.) The World Bank is pushing a worldwide reduction in APG (associated petroleum gas) flaring, because of the amount of black carbon and other particulates it puts into the atmosphere. The WB wants to get to ZERO flaring, also by 2030.

There are three options that I know of for commercialization of biogas and APG:
- First is to convert to electricity, which is the FM target market.
- Second is to clean it up and put it into an NG supply. In the US, this second option is usually used to push the gas into the transportation industry, because of the EPA RFS credits, and additionally in California, the ARB LCFS credits, which gives biogas/APG producers additional dollars for their gas sales.
- Third option is to turn it into protein. Like for example, www.feedkind.com

The Rotapower engine is unique in it's ability to run on biogas and sour APG (sour just means high hydrogen sulfide content). For two stroke engine gen-sets, generally you have to clean the hydrogen sulfide (H2S) and the siloxane from the gas before you can use it. The H2S turns into sulfuric acid when exposed to engine oil, and this damages components. The siloxane turns into silica or silicates when it is combusted in the engine, and the silica and silicates will damage the valves on a two-stroke engine over a short period of time. (In the 1970's, a lot of engines that were used to generate electricity from landfill biogas were failing because of siloxane, and it took the industry a while to figure it out.) If you use a micro-turbine or turbine engine to burn the gas, you don't have to filter out the H2S, but you still have to filter out the siloxane. For the Rotapower engine, we don't have to filter out either contaminant. This makes for significant cost savings and reduction in operational & maintenance costs as well. Also, because our combustion is lean and cooler than piston engines, we have very low NOx emissions, which is the biggest contributer to smog.

We have done a market analysis and developed a business plan that shows an IRR of 1,350% over a 5 year period with an initial investment of $5,000,000, with only 3% market penetration. We believe this makes a compelling business case. Also, because our installed costs ($877/kW) are far lower than existing gen-set solutions ($2500/kW) we can make a compelling economic case to customers. Most agricultural customers buy these systems with limited funds, typically 50% grants and 50% loans taken on by the customer. Lower capital costs means less money required from both the grants and the loans, and a much faster payoff (especially with lower O&M for the Rotapower engine). There have been many investor groups in California investing in these generation systems, because they could negotiate 20-year Power Purchase Agreements with Public Utilities for a guaranteed price when selling the electricity. However, this has become much harder to do now, and typically PPAs only worked for very large biogas producers.

Freedom Motors been approaching various investment groups, and we continue to do so. However, to make things more expedient and keep things under our control, we have initiated a program to request short term loans from various trusted parties and stockholders in order to raise approximately $500,000. This would allow us to complete all the necessary work on a Tier 1(or 2) Reg A+ private securities offering to raise $10,000,000 in operating capital. I have commitments now for $300,000 in loans, but we only started this Program on Monday and it is still early, so we hope to get the rest within a week or two. Freedom Motors already has the the SEC paperwork completed (Form 1-A) as we started the filing process in 2016, before it was abandoned. Now we are restarting that process.

There is still a lot of confusion around the PSC deal that was announced at the last Shareholder's meeting. That deal has not collapsed, but also we can no longer wait for funding. If the funding comes through, great. If not, no big deal because we are moving forward.

The $10,000,000 in operating capital raised by the Reg A+ will be used in two ways. $5,000,000 will be used to setup our low-volume engine manufacturing for the Rotapower 530cc engines for the biogas generator. We have a little engineering work to productize it, including the identifying the control electronics, inverters, induction and/or synchronous PM generators, the fuel system, enclosures, and a few other issues. We expect we can get a prototype built in-situ in about 2-4 months after funding. During this time we will work on marketing and customer relations to "prime" the marketing machine. Our goal is to start making sales of production products within 6-9 months, and we should be profitable within one year.

The second half of the Reg A+ will go into Rotapower engine R&D and some debt reduction. We have applied for a few grants for engine development, so we may get some additional funding through those channels, but we are not planning for it. The R&D is mostly for development work on the smaller engines (27cc) and the compound engine design, which is the key technology for the Skycar. Most of the debt for FM is held unsecured by MI. Some of the debt payback to MI will be used to complete the FAA certification of the Neuera. This will start as soon as funds are available. This could also get funded through some of the investor groups that have visited MI, but again, we are not relying on that, so we are building onto into our Reg A+ plan. We do not have immediate plans to work on the Skycar M400 hybrid prototype, unless we get additional funding. This is partly because this prototype will require the compound engine design which has about 1 year of R&D work to complete. Also, it is because the FAA certification process for the M400 is far more difficult, and any purchaser would have to be a fully licensed pilot. And more importantly, we wouldn't have as big an immediate market. We have a lot of market interest in the Neuera Firefly for Search & Rescue operations. Also, the agricultural world has been clamoring for a heavy-lift utility drone vehicle, which the Neuera is perfect for (it could be remote controlled, or flown by pilot). The FAA process is much simpler for the Neuera and Neuera Firefly, and operators will not need a full pilot's license, allowing us to come to the market much faster. Also, we believe a Neuera test flight will bring back some credibility to MI and additional investor interest, as well as renewed stock interest.

That is a summary of our plans - feel free to support them or knock them down, I welcome *all* commentary. I will not get on this board often because I just don't have the time. I'm hoping that I can hire someone who can deal with the social media outreach in the future, but for right now, there is only me.

If you have any additional questions and you want to reach out to me, feel free to email me at either [e-mail] or [e-mail].

Best Regards, Dave