December 14 , 2004

IVT™ Testing Advances with Positive Results

I am pleased to inform you that we have begun full load (vehicle weight) dynamometer testing of our infinitely variable transmission (IVT™) in the GM Tahoe. I am aware of how anxious you must be to see the results of our tests, and I appreciate your patience, which will be rewarded. My goal is to present you with as much unassailable data as I can, while preserving our strategic course towards one or more commercializing events.

Our first objective was to find the efficiency ranges for the IVT™. This is a critical factor because existing automatic transmissions are extremely inefficient at low speeds due to the well-known inefficiency of the torque converter. A torque converter is approximately 10% efficient at start-up and 60% efficient at 30 MPH. The IVT™ is based on proprietary hydraulics, eliminating the need for a torque converter, thereby producing impressive fuel economy gains.

Our initial tests have confirmed the optimal efficiencies and the remarkable performance metrics we had anticipated. We have proven that we have a very efficient mechanism. Specifically, the IVT™ equipped GM Tahoe starts moving at less than 400 psi, which is only one tenth of the design capability of the transmission, and steadily progresses to 20 MPH at only 770 RPM and to 30 MPH at just over 800 RPM. The start up efficiency translates to approximately 65%, and progresses rapidly to more than 80% efficiency at 20 MPH that is attained at approximately one half the RPMs required by automatic transmissions. Furthermore, when our hydraulic motor reaches engine speed (1 to 1 ratio), the IVT™ efficiency exceeds 90%. This is comparable to a lock-up mode in an automatic transmission that bypasses the torque converter and drives on gears.

For suburban drivers, the average driving speed across a wide array of conditions, including both highway driving along with the stop and go of city driving, is less than 30 MPH. This reinforces our intense focus on the need to improve efficiency and fuel usage at low speeds (below 35 MPH).

I will keep you informed as we move forward toward the timely conclusion of our testing and the presentation of our hard data.

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Don't miss "Hydrogen's Bomb" on the future of fuel cell technology in the January, 2005 issue of Popular Science.

Sincerely,

Richard Ottalagana, CEO