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To: All Newsletter Subscribers
From: Paul S. Moller
MOLLER INTERNATIONAL
This newsletter is a follow up to two recent newsletters that I sent out. If you did not receive either of these, please follow this link where links to copies are available. Many MI stockholders have been asking when they can exchange their MI shares for FM shares. Unfortunately, nothing happens quickly when the Government is involved. The exchange process must be approved by the SEC as to its fairness to both FM and MI stockholders. This process will be expensive and includes audited financial statements for both companies. Since MI has no funds, the cost must be borne and justified by FM.
Question: What makes a stock exchange worthwhile for some MI stockholders?
Answer: Many MI stockholders purchased their shares before MI became a public company. In this case they own nearly equal amounts of MI and FM shares. These shareholders have little reason to convert since liquidation of MI, if it were to occur, would have little effect on the value of their investment. Most MI shares were purchased after MI became a public company and the share price dropped to pennies per share. These very large stockholders would lose their entire investment if MI were forced into liquidation by its creditors, or if MI continues to be unable to raise capital.
An additional consideration is the possibility of FM or MI being mandated to become a reporting company. Both FM and MI have an enough non-accredited stockholders that once its assets exceed $10 million, it must, under SEC rules, become a reporting company and its stock could be publicly traded if it wished. MI’s debt would make it necessary to raise approximately $35 million before this could happen. FM has agreements in place that could require it to become a reporting company within the next few months. In this case FM could choose to become a publicly traded company.
Question: What makes a stock exchange worthwhile for FM?
Answer: FM sees the use of its engine for personal aircraft applications (PAVs) as a future high-growth engine market. MI cannot fund the production and FAA certification cost of an aircraft engine, while FM is reluctant to fund this cost without being a major stockholder in MI.
FM has indicated an interest in exchanging 100 MI shares for one FM share and will honor that offer even if the valuation indicates a higher ratio. On the other hand, FM will accept a lower ratio if that is indicated by the analysis, provided that enough MI shares are offered to be exchanged.
Please, be patient during this process. Very significant developments are occurring within FM, including an agreement to purchase a large block of FM shares concurrent with creating a volume Rotapower® engine production facility in India. You will know the details of this agreement long before you need to decide whether to exchange some of your MI shares for FM shares. It should also be noted that while FM owes MI over $2 million for contract work it did in the past, these funds when received by MI are needed to meet its pressing financial obligations.
If you did not respond to my previous Newsletter regarding exchanging shares, you may do so under the assumption that the exchange rate is unknown. Once it is known you can then decide how many MI shares you wish to exchange.
The previous response to exchanging shares was high, but not high enough to provide FM with an acceptable ownership of MI. Those exchanging their MI shares for FM shares will also benefit from maximizing the amount of MI shares that FM acquires.
Please feel free to contact me with any additional questions which I will answer in my next Newsletter. Email me at paul@moller.com or paul@freedom-motors.com. My cell phone number is (530) 760-7177.
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