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Analyst: Victor Sula, Ph.D. Initial Report November 6th, 2008


RNNM daily

1.75 1.50 1.25 1.00 0.75


Symbol Exchanges Current Price Price Target Rating Outstanding Shares Market Cap. Average 3-m Volume

0.50 0.25 ©


800 600 400 200






Ronn Motor Company, Inc. 4305 FM 2147 W Horseshoe Bay, Texas 78657 USA Phone: 888-460-0960 Fax: 830-693-2254 E-mail: Website:

Company Overview RNNM OTC PK $0.45 $5.12 Speculative Buy 200 Million $90 Million 34,265

Ronn Motor Company, Inc. (RNNM) designs and builds high-quality, high-performance sports cars that are also eco-friendly and feature alternative power systems able to deliver high gas mileage and reduced emissions. The Company plans to offer hydrogenfueled, fuel cell-powered and plug-in-electric vehicles. RNNM has developed and patented a proprietary hydrogen-generating system that produces and injects hydrogen gas into a conventional internal combustion engine, enhancing the combustion process and allowing fuel to burn more efficiently with significant emissions reductions.

Source: Yahoo Finance, Analyst Estimates

The Company’s initial sports car project, the ScorpionTM, is a midengine, hydrogen fuel-injected hybrid, eco-friendly high-performance sports car. The Scorpion will be equipped with an Acura® aluminum and magnesium V-Tech, Type S V-6 motor that develops nearly 300 horsepower stock and with RNNM’s twin turbo option, over 450 horsepower. At minimal boost settings on the turbo chargers, the Scorpion is able to achieve speeds in excess of 180 mph. The vehicle’s body has been designed and fabricated by Gaffoglio Family Metalcrafters, Inc., a world-renowned automotive engineering company. At higher turbo boost settings, the Scorpion should be able to break the 200 mph speed barrier. The Scorpion will debut at the 2008 SEMA Show in Las Vegas in November. The SEMA Show showcases the very best in groundbreaking automotive products and new technology and attracts more than 120,000 attendees from over 100 countries. RNNM plans to build 190 production units during its first year of production. The Scorpion will retail for $150,000. A Limited Edition Scorpion HX model will sell for $250,000. Ronn Motor Company, Inc. (OTCPK: RNNM)


Analyst: Victor Sula, Ph.D. Initial Report November 6th, 2008

The Company has equipped the Scorpion with a hydrogen-on-demand system (H2GO™) that increases the fuel efficiency of its internal combustion engine by as much as 25%, boosts power and reduces CO2 green house gas emissions by approximately 90%. With the hydrogen generator installed, the car will get about 40 miles to the gallon. RNNM is the first car company to install hydrogen-on-demand technology as a standard feature in its vehicles. In addition, the Company will soon begin manufacturing the H2GO™ system on a commercial scale as a retrofit device for any existing car or truck. In late July, the Company was awarded the Publishers Choice Award by the duPont REGISTRY™. The award committee noted that “The ‘Scorpion provides environmentally-conscious consumers with a car that has the standout design and performance of an exotic car, but keeps carbon footprints at a minimum.” The duPont REGISTRY™ is a buyers’ gallery of fine automobiles and a premiere luxury marketplace for cars, homes and boats. The Scorpion will be displayed at the duPont REGISTRY™ booth at the SEMA show, where publisher Tom duPont will personally unveil the supercar. RNNM will be partnering with the duPont REGISTRY™ for multiple automotive events over the next 12 months.

Highlights Market opportunity increasing for hybrid vehicles Growing environmental concerns and demand for “green” technologies are encouraging automotive manufacturers to invest heavily in the development of environmentally friendly cars. Hybrid vehicles offer the advantages of low fuel consumption and low emissions while achieving speeds and performance comparable to conventional cars. At present, few hybrid vehicles are on the road but these technologies have the potential to become mainstream. The principal limiting factor has been the high prices consumers must pay for hybrid vehicles; however, prices should begin to decline as more hybrids are produced and manufacturers achieve economies of scale. High oil prices and environmental awareness are causing more consumers to choose hybrid cars. Ronn Motor Company, Inc. (OTCPK: RNNM)


Analyst: Victor Sula, Ph.D. Initial Report November 6th, 2008

Real-Time Hydrogen Injection technology leadership The Company is leveraging its in-house expertise in hydrogen-on-demand technology to develop and produce emission reduction devices for transportation applications. RNNM’s innovative technology, marketed under the H2GO™ brand, reduces fuel consumption while increasing vehicle engine power. The technology consists of a system that generates hydrogen and oxygen from distilled water on-board a vehicle and delivers these gases to the air intake of an internal combustion engine, resulting in reduced emissions, enhanced engine performance and fuel consumption efficiency. Significant cost savings with H2GOTM implementation In an era of high gasoline prices, the Company’s technology could provide consumers with immediate, substantial fuel cost savings. Based on the device’s $999 retail price and the H2GO™ system’s 30% mid-range mileage savings, users recoup their investment in fewer than 50 tank fill-ups. Someone driving 35,000 miles per year in a vehicle equipped with a H2GO™ system will recover his investment in the device in about eight months at the mid-range 30% mileage savings. This estimate assumes 70 fill-ups per year (35,000 miles per year /500 miles per tank). Technology advantages may lead to rapid adoption The H2GO™ system is similar in size to a standard car battery and holds approximately one gallon of water, which can produce hydrogen as needed for approximately 5,000 miles (equivalent to approximately 10 tanks of fuel for most vehicles) before requiring a water refill. H2GO™ is adaptable to any internal combustion piston engine, including more than 250 million registered vehicles on American roads today. H2GO™ uses a patented ProCooler™ which (i) reduces A/C refrigerant usage by 20% to 25%; (ii) generates less drag on the engine, and (iii) increases horse power by 5% to 7%. The technology improves combustion by as much as 25%, reduces emissions by approximately 75-90% and boosts fuel savings by as much as 15-35%. Introduction of exotic Scorpion car RNNM is introducing the ScorpionTM, which is the world’s first hydrogen-enhanced, eco-friendly exotic sports car. The Scorpion will produce nearly 300 horsepower in its stock form and 450 horsepower with the twin turbo option, while maintaining Acura/Honda reliability. The Scorpion will accelerate from 0 to 60 mph in 3.5 seconds, will get 40 mile to the gallon on highways and will produce nearly zero CO2 emissions. RNNM also plans to develop a hydrogen/electric plug-in hybrid to be introduced in 2010. The Company has already accepted delivery of its first ScorpionTM, which it plans to unveil to the world media at the November 2008 SEMA show in Las Vegas, Nevada. Plan to sell 300,000 H2GOTM systems and 190 ScorpionTM sports cars in 2009 RNNM plans to build a car showroom in its manufacturing facility and an executive sales room for pre-qualified Scorpion buyers where potential customers can view a multimedia presentation highlighting the car’s exclusive design features, including the hydrogen-on-demand fuel system. The Company plans to gain national attention for the Scorpion by participating in national and international auto shows in Detroit, New York, Geneva, Abu Dhabi and other major cities. The Company will also advertise in magazines that reach a wealthy audience such as the Robb Report and the DuPont REGISTRY. Ronn Motor Company, Inc. (OTCPK: RNNM)


Analyst: Victor Sula, Ph.D. Initial Report November 6th, 2008

Business Model RNNM has designed and begun manufacturing a finely detailed and hand crafted, exotic high-performance sports car whicht incorporates the Company’s innovative hydrogen-on-demand technology. The technology consists of a system that generates hydrogen and oxygen from distilled water on-board a vehicle and delivers these gases to the air intake of an internal combustion engine. The hydrogen-on-demand system reduces engine emissions, enhances engine performance and improves fuel consumption efficiency. With the H2GO™ system, combustion improves by approximately 20% - 25%, emissions are reduced by roughly 75- 90% and fuel savings of as much as 15%-35% are achieved. The system increases engine power while reducing wear. RNNM’s exotic Scorpion supercar features a technically advanced Acura 3.5 liter Vtec Type S engines, widely known for its superior engineering, high horsepower, light weight and reliability. This stock engine produces nearly 300 horsepower and the RNNM twin turbo equipped model produces 450 horsepower. Because of the hydrogen fuel enhancement system, the Scorpion gets approximately 40 miles to the gallon. The Scorpion will be a limited production vehicle. Annual production will be limited to between 100 and 500 automobiles. The Company intends to use this automobile as an entry point into the automotive marketplace, providing a platform for its other emerging technologies which include hydrogen fuel cells and electric plug-in hybrid cars. The Company also plans to develop and commercialize hydrogen-generating, Real-Time Hydrogen (RTH) and hydrogen fuel injection devices which can be installed in existing cars, trucks, RVs, aircrafts and boats. As soon as testing is completed, RNNM plans to begin manufacturing and marketing its proprietary H2GO™ system to automotive dealerships, trucking fleets, government fleets and individual automobile owners nationwide as an economical aftermarket solution for increasing gas mileage and reducing noxious emissions. RNNM is currently involved in negotiations with and expects to soon finalize an agreement with a major manufacturer/distributor which will manufacture, warehouse and ship H2GO™ systems. RNNM is also developing a hydrogen/electric plug-in hybrid it plans to introduce in 2010. In the plug-in hybrid, pumped hydrogen gas will be fed into the fuel cell where it will be electrochemically converted into electricity with no combustion, no moving parts, and no emissions other than water vapor. Electricity will be used to power the vehicle. The Scorpion chassis was designed so it could be easily converted to various power plants and drive systems so RNNM’s R&D and redesign costs will be minimized. The Company expects to produce between 5001,500 premium plug-in-hybrid vehicles annually.

Ronn Motor Company, Inc. (OTCPK: RNNM)


Analyst: Victor Sula, Ph.D. Initial Report November 6th, 2008

Strategy The Company’s goal is to become a leading manufacturer of hydrogen-on-demand systems for mobile transportation and to be recognized for its exotic supercars equipped with alternative power systems. The Company plans to accomplish these goals by: • • • • • • • •

Developing commercial mobile applications for its hydrogen-on-demand and fuel injection technologies; Establishing strategic relationships with automobiles dealers and distributors globally; Pursuing selective acquisitions of similar or complementary businesses; Expanding its product markets through joint-venture, mergers or acquisition; Leveraging the full capabilities of its technology to drive new product development; Insuring effective test bed support for new market technologies, designs and performance measuring; Providing a high end, high performance, and economically friendly sports car experience for the customer; Increasing awareness of RNNM’s brand and the cost/environmental benefits of its technology.

The Company plans to build a new campus, which will feature a 10,000 square foot showroom and executive offices, as well as an assembly plant, which will occupy 40,000 square foot of clear space and be outfitted with stateof-the-art equipment. Sales and Marketing The Company will use targeted marketing programs to reach potential customers. RNNM intends to gain national attention by exhibiting its Scorpion car at national and international auto shows in Detroit, New York, Geneva, Abu Dhabi and other major cities. The Company will also advertise in premium magazines such as the Robb Report and DuPont REGISTRY. RNNM is also exploring opportunities for strategic partnerships with lease companies and exotic car dealers. The Company will accept advance orders for its Scorpion and Limited Edition Scorpion HX if the customer provides a deposit, which will be placed in an escrow account with a third party.

Ronn Motor Company, Inc. (OTCPK: RNNM)


Analyst: Victor Sula, Ph.D. Initial Report November 6th, 2008

Technology and Products Real-Time Hydrogen Injection System - H2GO™ The value of using hydrogen to enhance combustion in internal combustion engines has been researched and proven in hundreds of practical applications using on-road vehicles. The Company’s technology is based on a proprietary system in which hydrogen and oxygen are generated on-demand via electrolysis and then introduced into the combustion process. H2GO™ system draws electrical power to split distilled water into hydrogen and oxygen. Both of these gases are then injected directly into the air intake of the engine and blended with gasoline at a ratio of 30% hydrogen. Introducing hydrogen into the process alters the combustion pattern of the fossil fuels so that chemical energy is released at a more auspicious point in the power cycle, resulting in greater adiabatic efficiency and lower emissions. By converting more chemical energy into mechanical energy, fuel consumption is reduced and exhaust emissions (CO, PM, HC, NOx) are lowered dramatically. The H2GO™ system also utilizes an advanced, proprietary piggy-back electronic control module (ECM) that monitors the actual mixtures of fossil fuels, oxygen and the gaseous hydrogen produced by the RTHI system. The onboard, computer-controlled “on demand” system will produce revolutionary hydrogen assistance in real time, capturing the emissions-reducing benefits of hydrogen fuel without the safety hazards, expense, and filling station requirements of hydrogen storage tank systems. The H2GO™ system holds approximately one gallon of water, which produces enough hydrogen for approximately 5, 000 miles before requiring a refill. H2GO™ is adaptable to any internal combustion piston engine vehicle and uses a patented ProCooler™ that (i) reduces A/C refrigerant usage by 20% to 25%; (ii) generates less drag on the engine, and (iii) increases available horse power by 5% to 7%.

Ronn Motor Company, Inc. (OTCPK: RNNM)


Analyst: Victor Sula, Ph.D. Initial Report November 6th, 2008

Potential savings RNNM’s technology enhances combustion by injecting hydrogen into the engine. In this era of $3.00+ per gallon gasoline, this new technology may provide substantial fuel cost savings. Basic assumptions used for the table below: Gas tank size = 20 gallons (average mid-size sedan); Cost per gallon = $3.60 (projected regular grade gasoline prices for 2008 and 2009 [1]) Miles per gallon = 25 (average: mixed city, highway) Miles per tank = 500 (20 gals. x 25 mpg) Cost per fill-up = $72 (20 gals. x $3.60) Miles per year = 35,000 (average per year) Calculation of saving from H2GO™ system H2GO™ % MPG Savings

Extra Miles Per Tank

+20% +25% +30% +35% +40%

100 125 150 175 200

Savings Per Tank Fill-Up $14.40 $18.00 $21.60 $25.20 $28.80

Source: Analyst estimates.

Based on the device’s $999 retail price and the H2GO™ system’s 30% mileage savings, users recoup their investment in fewer than 50 tank fill-ups ($999/$21.60 savings per tank=46.3 fill-ups). Motorists driving 35,000 miles per year with a H2GO™ system-equipped vehicle can recover their investment in the device in about eight months. This estimate assumes 70 fill-ups per year (35,000 miles per year /500 miles per tank). Estimated H2GO™ system savings Year




1 2 3 4 5

$1,008 $1,008 $1,008 $1,008 $1,008

$1,512 $1,512 $1,512 $1,512 $1,512

$2,016 $2,016 $2,016 $2,016 $2,016





Source: Analyst estimates.

_________________________ 1.

Ronn Motor Company, Inc. (OTCPK: RNNM)


Analyst: Victor Sula, Ph.D. Initial Report November 6th, 2008

THE SCORPION The Scorpion is designed with a light-weight, hand-built carbon fiber body, over a race car- designed chrome molly chassis, powered by the latest high tech Acura® V-Tech Type S, V-6 engine coupled with a six speed synchronous manual transmission. The power plant will produce nearly 300 horsepower in its stock form and 450 horsepower in the twin turbo option. The Scorpion can accelerate from 0 to 60 mph in 3.5 seconds. Equipped with a hydrogen fuel injection system, the Scorpion will get a 40 mile per gallon highway fuel rating with nearly zero CO2 emissions. The Scorpion will consist of a basic model with several upgrades available. The basics include:

INTERIOR • Recarro custom leather seats, with heated and electric modules • Custom carbon fiber center console • Removable Steering Wheel • Six Speed Steering Wheel Paddle Shifter for automatic transmissions • Custom LED gauges • 3 point shoulder harness • Bose 8 speaker sound system • GPS guidance system, with satellite tracking • Air Bags • RNNM eco-saving proprietary Procooler equipped air conditioning system DIMENSIONS • Wheel Base 105 inches • Width Front 75 inches • Width Rear 80 inches Ronn Motor Company, Inc. (OTCPK: RNNM)

EXTERIOR • HID Xenon Headlights • LED side markers, Signal and Brake Lamps • NEON lighting in key areas including interior and engine bay • Carbon Fiber Body • Carbon Fiber Side Mirrors

SUSPENSION • Custom Race Designed Chrome Moly Chassis • Indy car style hybrid fully independent front and rear suspension • Fully adjustable coil over shocks • Billet custom machined components


Analyst: Victor Sula, Ph.D. Initial Report November 6th, 2008

BODY • Concept and design by founder Ronn Maxwell • 3D modeling, design interpretation, cad drawing by Jonathan Gryphon, of Gryphon Automobile Design • Lamborghini style doors • Enclosed smooth under carriage like Ferrari and Formula 1 • Front and Rear air diffusers • Rear air spoiler • 6 standard paint colors available, with any choice of custom colors • Sikkens paint system from Akso Nobel • Carbon Fiber hand laminated body

ENGINE/DRIVE TRAIN • 2008 Acura® Dual Overhead Cam, Aluminum block, 3.5 liter, V-Tech, V-6, Type S Engine • 289 horsepower in stock form, 450 horsepower with twin turbos • 6 speed manual transmission, 6 speed automatic transmission • Light weight clutch and flywheel • RNNM proprietary refrigerated intercoolers • Limited Slip Differential • 4 wheel disc brakes, 12 inch cross drilled rotors, polished Wilwood calipers • Polished stainless front spindles

Industry Outlook Automotive industry In 2007, a total of 73 million new automobiles were sold worldwide: 22.9 million in Europe, 21.4 million in AsiaPacific, 19.4 million in North America, 4.4 million in Latin America, 2.4 million in the Middle East and 1.4 million in Africa [2]. The markets in North America and Japan were stagnant, while those in South America and Asia grew strongly. Of the major markets, Russia, Brazil and China saw the most rapid growth. In 2008, automotive manufacturers have experienced pricing pressures, changes in consumer buying habits and rising raw material costs. The industry also faces increasing external competition from the public transport sector as consumers reevaluate their private vehicle usage. Auto manufacturing is the nation’s largest single manufacturing industry in terms of total value of products, value added by manufacturers, and number of wage earners employed. One of every six American businesses[3] is dependent on the manufacturing, distribution, servicing, or use of motor vehicles. Sales and receipts of automotive firms represent more than one-fifth of the country’s wholesale business and more than one-fourth of its retail trade. In a typical year, it accounts for 5% of GDP, 16% of all durable goods shipments, and 6% of all manufacturing employment in the United States.

_________________________ 2. 3.

Ronn Motor Company, Inc. (OTCPK: RNNM)


Analyst: Victor Sula, Ph.D. Initial Report November 6th, 2008

Annual U.S. Light Vehicle Sales (Mn. of units)

20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0































































2.6 2.5
















In current dollars, the automotive industry grew from just over $100 billion per year in the late 1970s to nearly $500 billion in 1999, its all-time high. Gross output declined in 2000-01, rose to $436 billion in 2002, but then fell again to $424 billion in 2004. Industry revenues were approximately $675 billion in 2006. Fuel optimization technologies The impacts of rising oil and gas prices may be manageable on a macroeconomic level, but there is plenty of evidence that individual consumers are negatively affected. A 2006 survey of American drivers by Consumer Reports magazine indicated that more than one-third were considering replacing their current vehicle with a more fuel-efficient model. Technologies that improve fuel efficiency include devices or designs that control valve timing, reduce engine friction, improve transmission efficiency or reduce other losses. Existing fuel saving technologies include fuel cells, battery-powered vehicles, hybrid vehicles, alternative fuels, and other emission reduction alternatives such as diesel oxidation catalysts and diesel particulate filters. Worldwide, there were approximately 800 million cars and light trucks on the road in 2006. By 2020, that number will reach one billion. There are approximately 240 million light vehicles in operation in the United States. The global market for fuel optimization technologies was $35.3 billion in 2005, estimated at $38.6 billion in 2006 and is forecast to grow 11% annually to $66.1 billion by 2011. Applications for these technologies in the transportation sector represent the largest market segment. Transportation applications represented a $27.8 billion market in 2005 and a $31 billion in 2006. This market is expected to grow 13.4% annually to $52 billion by 2011. Ronn Motor Company, Inc. (OTCPK: RNNM)


Analyst: Victor Sula, Ph.D. Initial Report November 6th, 2008

Global Market for fuel optimization technologies, $ Billion 66.1

70 60 50 40





30 20 10 0 2007






The U.S. and other governments have a strong interest in promoting technologies that reduce their dependence on imported petroleum and optimize oil and gas use. These governments are supporting the development and commercialization of fuel optimization technologies through government-funded R&D, tax incentives, and other policy initiatives. The U.S. Department of Energy is involved in six fuel efficiency programs. The total cost of these projects is approximately $14 million. It is estimated that these technologies could reduce fuel consumption for all highway vehicles by 10%, saving over one million barrels of oil per day by 2025. These projects are part of a DOE initiative to improve engine efficiency by at least 30% to 45% for light-duty vehicles by 2010 and by 40% to 55% for heavyduty vehicles by 2013. Hybrid-electric vehicles Consumer hybrid vehicles have been getting a lot of media attention recently due to their fuel economy benefits. Oil prices around $100 a barrel and a world dependent on foreign oil encourage new car buyers to “go electric�. Another factor driving increased sales of Hybrid-Electric Vehicles (HEV) is reduced CO2 emissions. There are only a few hybrid vehicles on the road today but the technology has the potential to become a mainstream one. High costs for hybrid has been a limiting factor; hybrid vehicles are generally priced $2,000-4,000 higher than conventional light vehicles. However, cost disparities between HEVs and conventional light vehicles should decline as production volumes increase. On a global level, the U.S. dominates in hybrid vehicle sales, followed by Japan and Europe. Toyota and Honda are the leading hybrid car makers. According to an IDTechEx[4] report, the HEV industry generated $31.1 billion in sales globally in 2005 at ex factory prices, excluding electric toys. The report forecasts seven-fold growth in the HEV market between 2005 and 2015. According to Freedonia Group, Inc., worldwide demand for hybrid-electric vehicles will advance to 3.9 million units in 2015 and then nearly double by 2020 [5]. Demand for HEVs will rise in response to rising energy costs and increasing emissions regulations worldwide. Although hybrid cars account for only about 3% of U.S. car sales, _________________________ 4. 5.

Ronn Motor Company, Inc. (OTCPK: RNNM)


Analyst: Victor Sula, Ph.D. Initial Report November 6th, 2008

their share is growing rapidly. Hybrid cars sales in the U.S. market are likely to exceed the one million milestone by 2012 [6].

The US Hybrid Electric Passenger Vehicle Sales & Market Share 2000-2012


5.6 %

1000 800


600 400 200 0









6.0 %

4.7 %


9.4 20.3 36.0 47.5 83.2 209.7 246.6 324.3 382.0 614.0 772.0 938.0 2000 2001 2002 2003 2004 2005 2006 2007 2008E 2009E 2010E 2011E

1,007 2012E

7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%

Source: Electric Drive Transportation Association.

The 2005-2007 market expansion was due to high oil prices, coupled with automakers lowering price premiums for most hybrid models. In addition, sales run-ups between 2006 and 2007 reflect increased production and sales of the popular Toyota Prius. An estimated 255,000 hybrid vehicles were sold this year in the U.S. market through October 2008. Retail gasoline prices Strong global demand and low surplus production capacity, backed by a weaker dollar contributed to record crude oil prices this summer of $147.27 per barrel. The current economic slowdown is reducing oil demand and prices. However, oil supplies are expected to remain relatively tight because of slow production growth. Absent a major worldwide economic recession, WTI crude oil prices are projected to average around $112 per barrel in both 2008 and 2009[7]. According to the Energy Information Administration, weekly prices of regular-grade gasoline, which peaked at $4.11 per gallon on July 14, averaged $3.05 per gallon in October, a decline of $1.06. Diesel fuel prices fell from $4.76 per gallon on July 14 to $3.57 in October, a drop of $1.19. Regular-grade gasoline prices are projected to average around $3.56 per gallon in both 2008 and 2009.

_________________________ 6. 7.

Ronn Motor Company, Inc. (OTCPK: RNNM)


Analyst: Victor Sula, Ph.D. Initial Report November 6th, 2008

NYMEX Crude Oil Futures Close (Front Month) $160

$ / Barrel

$140 $120 $100 $80 $70.53 $60 11/01/2007 01/03/2008 03/05/08 05/05/08 07/03/08 09/03/08 10/31/2008 12/03/2007 02/04/2008 04/04/08 06/04/08 08/04/08 10/02/08

Nov. 1, 2007 / Nov. 4, 2008 Close

WTRG Economics Š2008 (479) 293-4081


The U.S. Energy Information Administration projects three scenarios for gasoline prices. In the high demand/high price scenario, crude oil prices rise to more than $119 per barrel in 2030 and gas prices increase from $3.06 per gallon in 2016 to $3.52 per gallon in 2030. In the low price case, gasoline prices decline to $1.74 per gallon in 2016, increase slowly through the early 2020s, and level off at about $1.84 per gallon through 2030 [8]. Average US delivered process for motor gasoline, 1990-2030 (2006 dollars per gallon) History


Projections High Price

3 Refer2


1 0






Source: _________________________ 8.

Ronn Motor Company, Inc. (OTCPK: RNNM)


Analyst: Victor Sula, Ph.D. Initial Report November 6th, 2008

Financial Outlook The transition to a low-emissions global economy offers significant opportunities to technology companies such as RNNM. The Company has developed a hydrogen-on-demand system it plans to distribute through automotive dealerships, trucking and government fleets and individual automobile owners. This product offers an economical aftermarket solution for increasing gas mileage while reducing noxious emissions. The Company’s hydrogen-on-demand system will be available through distributors in the first quarter of 2009 at a projected retail price of $999 per unit. RNNM plans to sell at least 500,000 Real-Time Hydrogen Injection systems in 2010, which represents less than 0.5% penetration of the U.S. car and truck market. In addition to H2GOTM systems, RNNM plans to sell the Scorpion eco-exotic sports car. The ScorpionM is equipped with RNNM’s proprietary H2GOTM real-time hydrogen system. The car is also planned as ethanol compliant and engineered to burn 70% gasoline/ethanol and approximately 30% hydrogen, thereby lowering fuel costs and greatly reducing emissions. RNNM plans to develop a hydrogen/electric plug-in hybrid for sales in 2010. The Company expects to produce between 500-1500 plug-in hybrid vehicles annually.

Sales Forecast FY 2009

FY 2010

FY 2011

Unit Sales Scorpion Plug in Hybrid Hydrogen Systems H2GO

190 0 345,000

250 500 500,000

350 1,000 500,000

Unit Prices, $ Scorpion Plug in Hybrid Hydrogen Systems H2GO

150,000 450

150,000 100,000 450

150,000 150,000 450

Sales Revenue, $ Scorpion Plug in Hybrid Hydrogen Systems H2GO

28,500,000 0 155,250,000

37,500,000 50,000,000 225,000,000

52,500,000 150,000,000 225,000,000




Total Sales

Source: Management outlook

Based on management’s goals for hydrogen system and Scorpion sales, we expect the Company to generate revenues of $183.8 million and net income of $63.4 million in 2009. Over the long term, we anticipate double-digit revenue growth as hydrogen system sales increase and RNNM rolls out a plug-in hybrid vehicle in 2010.

Ronn Motor Company, Inc. (OTCPK: RNNM)


Analyst: Victor Sula, Ph.D. Initial Report November 6th, 2008

Earnings forecast, $


Costs of Goods Sold Gross Margin Gross Margin % Total Operating Expenses Profit Before Interest and Taxes Interest Expense Taxes Incurred Net Profit Net Margin, %

FY 2009E

FY 2010E

FY 2011E

183,750,000 89,025,000 94,725,000 51.55% 4,170,600 90,554,400 0 27,166,320 63,388,080 34.50%

312,500,000 147,500,000 165,000,000 52.80% 8,064,950 156,935,050 0 47,080,515 109,854,535 35.15%

427,500,000 193,500,000 234,000,000 54.74% 8,950,150 225,049,850 0 67,514,955 157,534,895 36.85%

Source: Management outlook

RNHM intends to pre-sell most of its vehicles so the Company will not require significant external financing to commence production. Sales trends for other manufacturers introducing high-end, eco-sports cars suggest the market potential for the Scorpion. Fisker Automotive, for example, has predicted sales of 15,000 units for its $100,000 eco premium automobile, which goes into production in late 2009. Fisker has raised over $100 million from venture capital firms. Tesla Motors has verbal commitments for $100 million in private capital. Tesla reported 1,200 back orders for its $100,000 sports car, mostly from wealthy trendsetters.

Valuation We based our valuation analysis on companies offering fuel cell technologies, hybrid electric vehicles and onboard hydrogen generation technologies. Because of strong forecasted demand for these technologies, these companies trade at comparatively high Price/Sales multiples. We also considered the valuations of major auto manufacturers in our analysis.

Ronn Motor Company, Inc. (OTCPK: RNNM)


Analyst: Victor Sula, Ph.D. Initial Report November 6th, 2008

Comparative analysis Company name 5-Nov-08

Ticker Symbol

Price per Share, $

Mrkt. Cap. $ Mn




Sales estimates, $ Mn 2008 2009 %Chg

Fuel optimisation technologies peers Ballard Power Systems Inc. Ener1 Inc. FuelCell Energy Inc. Plug Power Inc.







































































Auto manufacturers peers General Motors Corporation Ford Motor Co. Toyota Motor Corp. Honda Motor Co. Ltd. Median


Source: Reuters, Analyst estimates

Because of its early development stage, we value RNNM at a discount to the technology peer group and at a one time forward P/S multiple. We multiply our 2009 revenue forecast by a one time P/S multiple, then divide that amount by 220 million shares outstanding to obtain our $0.84 target price. We are initiating coverage of RNNM with a Speculative Buy rating and a $0.84 price target. We believe these shares offer good upside potential for investors but encourage readers to consider the risk factors cited below before making an investment RNNM must overcome many hurdles to achieve sustainable profitability.

Ronn Motor Company, Inc. (OTCPK: RNNM)


Analyst: Victor Sula, Ph.D. Initial Report November 6th, 2008

Risk factors Development-stage business RNNM has no appreciable revenues or signed agreements to commercialize its products. Despite an optimistic management outlook, there is no assurance that the Company will be able to successfully enter the mass commercialization phase and establish a viable business. Unproven market potential of RNNM products RNNM’s success will depend on its ability to develop and commercialize its offerings. Despite rising demand for hybrid vehicles and the advantages of the Company’s technology, no assurance can be given that RNNM will be able to drive product sales and expand its business model on acceptable terms. Additional financing to continue as going concern RNNM will likely need to raise additional funds to implement its business plan. If the Company fails to obtain sufficient funds, implementation of its business plan could stall, affecting our valuation model. Global recession may impact vehicle sales The global recessions is impacting every segment of the economy, including car sales. Many of the major automobiles manufacturers have reported significant revenue declines. Reduced consumer spending and toughening credit standards may negatively impact RNNM’s revenues and earnings outlook.

Ronn Motor Company, Inc. (OTCPK: RNNM)


Analyst: Victor Sula, Ph.D. Initial Report November 6th, 2008

Management Team Ronn Maxwell Chief Executive Officer

The Company’s founder and CEO, Ronn Maxwell, has dedicated his professional career to building, designing, fabricating, racing, restoring and selling automobiles. Mr. Maxwell has owned several high-end automotive shops and proven that he has the operational and interpersonal skills required to bring a startup business to profitable operation. In 2007, Mr. Maxwell was engaged by an American firm to explore and develop a joint venture with a Chinese company, Zhonda International, China’s third largest bus manufacturer. As Director of Engineering and Manufacturing, he developed building processes and quality control procedures that were integral to the operation as Zhonda increased its global presence in preparation for export of its buses into the United States. In 2005, using his patented air conditioning technology that was launched into the automotive market in 1994, Mr. Maxwell designed and built a complete replacement air conditioning system for the Porsche 911 model. He formed a business, Rennaire LLC, to market these components and systems, which are now the standard for Porsche A/C systems. Ronn Maxwell also worked with Amos Minter in Dallas to produce classic Ford Thunderbirds. He has founded and managed five companies so far in his career and been recognized in the automotive industry for his talents and credibility. He has developed many strategic relationships in his career which RNNM can leverage for increased visibility and sales.

Damon Kuhn Chief Operating Officer

Mr. Kuhn and his partner operate Diamondback Engines, a Mopar specific race engine shop. Their engines have been shipped worldwide and power some of the fastest cars in their class. Crate engines as well as custom engines are built and sold directly, through the Internet and through magazine ads. Mr. Kuhn has not only fabricated his own record-setting race cars, but also owns and operates a race car fabrication facility in Dallas, Texas. His last manufacturing position was COO (2003-2005) at Phillips Industries in Dallas, Texas. Phillips is the world’s largest manufacturer of OEM wiring harnesses for the commercial trucking industry. At Phillips, Mr. Kuhn restructured their manufacturing processes, resulting in 12 months of record-setting sales. Mr. Kuhn has served as COO at two other companies and has gained a reputation as a turnaround specialist in the manufacturing industry. Additionally, his knowledge of automotive engineering makes him an expert in engine design, suspension and computer electronics.

James Rawlings Manager of Product Development

Prior to joining RNNM, Mr. Rawlings was a prototype engineer with Renault Automobiles and Electrical Engineer on a French electric automobile project.

Ronn Motor Company, Inc. (OTCPK: RNNM)


Analyst: Victor Sula, Ph.D. Initial Report November 6th, 2008

Adrian Pylypec VP of Sales and Marketing

Mr. Pylypec joined Dell Computer when it was still a small concern in 1989 and remained there until 2001. During his tenure at Dell, he became known for his work with Microsoft (strategic partner) and most notably for developing Dell’s corporate relationship with Boeing Corporation. He managed the Northwest Commercial Accounts division, which included 35 employees and $350 million in annual sales. After a year hiatus, he returned to the high technology industry in 2002 to help launch an ex-Dell start-up called Motion Computing. Mr. Pylypec successfully developed sales programs and revenue for the fledgling company. In 2004, Mr. Pylypec started his own automotive business called Monster Rides. He built a facility, hired a staff and now has one of the best-known hot rod shops in Texas. Emphasizing quality and creativity, Monster Rides became a profitable business in its second year of operation. Because of his broad knowledge and experience, Mr. Pylypec is filling multiple roles for RNNM. He will plan and build the Company’s new facility, engage legal and accounting partners, develop the corporate website and create sales and marketing programs.

Ronn Motor Company, Inc. (OTCPK: RNNM)


Analyst: Victor Sula, Ph.D. Initial Report November 6th, 2008

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In no way has my opinion been influenced by outside parties, nor has my compensation been either directly or indirectly tied to the performance of any security listed. I certify that I do not currently own, nor will own and shares or securities in any of the companies featured in this report. Victor Sula, Ph.D. - Senior Analyst Victor Sula, Ph.D. has held the position of Senior Analyst with several independent investment research firms since 2004. Prior to 2004, Mr. Sula held Senior Financial Consultant positions within the World Bank sponsored Agency for Restructuring and Enterprise Assistance and TACIS sponsored Center for Productivity and Competitiveness of Moldova, where he was involved in corporate reorganization and liquidation. He is also employed as Associate Professor at the Academy of Economic Studies of Moldova. Mr. Sula earned his Ph.D. degree in 2001 and bachelor’s degree in Finance in 1997 from the Academy of Economic Studies of Moldova. Mr. Sula is currently a level III candidate in the CFA program.

Ronn Motor Company, Inc. (OTCPK: RNNM)


Ronn Motor Company, Inc.  
Ronn Motor Company, Inc.  

Ronn Motor Company, Inc.