November 8, 2005

Click Picture for Video

During the third quarter, the company installed its new, modular, hydromechanical, infinitely variable transmission ( as distinct from its all hydraulic transmission ) in the SUV. We then proceeded to run this transmission under a “full load” ( full vehicle weight, 5575 lbs., load resistance on the Mustang dynamometer ) to both break it in and determine its mechanical capabilities. At the same time, we fine tuned the computer software program we are using to control the transmission’s operation to enable us to accelerate and decelerate the vehicle and to perform the “steady state” tests requested of us by auto manufacturers.

Management is convinced, as never before, that the company has an infinitely variable, hydromechanical transmission that functions exactly as it was designed to function. Preliminary findings from tests designed to measure the engine’s revolutions per minute ( rpm ) with our transmission accelerating through 15, 30, 45 and 60 miles per hour ( mph ) demonstrate that the modular, hydromechanical transmission reduces engine rpm dramatically in comparison to the stock, automatic transmission originally installed in the SUV.

First, as can be seen on the video, the engine rpm steadily increases as the vehicle accelerates to a vehicle test speed of 62 mph. Normally, with an automatic, you would see the rpm on the tachometer rise and fall as the transmission shifts gears. Please note that 62 mph was a test speed only; our modular hydromechanical transmission can attain any speed, being limited only by the engine’s capabilities.

Second, under full load, at 15 mph the engine rpm with our transmission was 600; at 30 mph, the rpm was 700; at 45 mph, the rpm was 1100 and at 60 mph, the rpm was 1400. At “steady state” operation, the engine rpm with our transmission averaged 728 at 30 mph versus 1160 rpm with the automatic and at “steady state” operation at 50 mph, the engine rpm with our transmission averaged 1216 versus 1500 rpm with the automatic.

We believe the auto industry will respond favorably to the mechanical capabilities and performance of our modular hydromechanical transmission. We also believe that its light weight, fewer parts and anticipated lower costs to manufacture will also be highly attractive to automakers.

We also believe our modular hydromechanical transmission will generate impressive fuel savings. To this point, preliminary data gathered from repeatable tests are very positive. At “steady state” operation at 30 mph, the engine only used an average of 87 ccms ( cubic centimeters ) of fuel per minute with our transmission versus an average of 109 ccms per minute used by the engine with the stock automatic transmission. This represents a 20% gain in fuel efficiency.

At "steady state" operation at 50 mph, the engine only used an average of 167 ccms of fuel per minute with our transmission versus an average of 181 ccms per minute used by the engine with the stock automatic transmission. This represents over a 7% gain in fuel efficiency.

While these findings are preliminary, they were generated by repeatable tests and management is confident that these results will be confirmed through more extensive testing. To this end, we are in the process of programming our computer software program to maximize the performance of our modular hydromechanical transmission so that we can successfully complete both EPA sanctioned city and highway tests as well as successfully perform real world driving scenarios.

When we have completed our testing with our hydromechanical transmission in the SUV, we will install it in our diesel Dodge Ram 4x4 pick up truck and conduct similar tests with this diesel powered vehicle.

In our last CEO Update, we asked that our shareholders email the Iso-Torque™ differential update and video to a rather exhaustive list of friends, acquaintances, business associates, safety council officials, insurance industry representatives, state and federal officials as well as anyone else they thought would be interested. We want to express our appreciation to all of our shareholders for your enthusiastic response to our request. To our knowledge, thousands of emails were sent, resulting already in positive responses from 2 insurance companies and 1 OEM.

In the light of this positive experience, we again ask you to feel free to email this video and update to the same type of distribution list by clicking here and thank you in advance for your anticipated, enthusiastic response.

Sincerely,

James Gleasman
Chief Executive Officer