A NEW STOCK RECOMMENDATION ON KleenAir Systems, Inc.
Nevada Corporation - founded 1995
July 2002
OTC BB: KAIR (news) Current Price: $0.98
Outstanding Shares: 16.4 Million 52-Week High $2.25 (2/6/02)
Market Capitalization:16.1 Million 52-Week Low $0.16 (10/4/01)
Daily Volume (50 day avg): 22,800
1711 Langley Avenue, Irvine, CA 92714
Tel: 949-955-3492
Fax: 949 955 3498
Email: kair@kair.com
Website: www.kair.com
Recent Events:
June 10, 2002 - KleenAir announces LOI for a Ford tier one automotive supplier
APRIL 30, 2002 - KleenAir completes the acquisition of Carboncloth
COMPANY PROFILE:
KleenAir is dedicated to the development, testing, and commercialization of products designed to help reduce smog and air pollution in the environment by suppressing the emission of nitrogen oxide (NOx). Nitrogen oxide reacts with sunlight in the atmosphere to create ozone. The principle initiative of KleenAir Systems is the NOxMaster System, which is an Electro-mechanical device that substantially reduces the amount of nitrogen oxide in gasoline engines and diesel exhaust. KleenAir owns the patents on which the NOxMaster Systems are based.
The purpose of the NOxMaster system is to reduce the oxides of nitrogen (NOx) to a level substantially lower than the minimum requirement of even the most restrictive state - California. The NOxMaster system has proven its ability to accomplish this task and consists of:
1) An ammonia injector
2) A tank of ammonia with solenoid values
3) A controller which senses engine parameters
The type of business that KleenAir is targeting is known as the automotive after-Market. The NOxMaster is clearly designed to be added to the exhaust system of any existing vehicle. The market segments that KleenAir plans to reach are the government mandated NOx reduction programs and the Emission Trading Credit Program.
MANAGEMENT:
The Company's strong management leadership includes industry experts and experienced professionals with extensive product development, sales, marketing, and financial management skills, along with key business relationships and a proven track record in building and operating successful businesses.
Lester Berriman - Chairman & Director of Research
Lionel Simons - President & CEO
John Zabsky - Engineering VP
William H. Ward, Jr. - Director
Statements regarding financial matters other than historical facts are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, section 21E of the Securities Exchange Act of 1934, and as that term is defined in the Private Securities Litigation Reform Act of 1995. The Company intends that such statements about the Company's future expectations, including future revenues and earnings, and all other forward-looking statements be subject to the safe harbors created thereby. Since these statements (future operational results and sales) involve risks and uncertainties and are subject to change at any time, the Company's actual results may differ materially from expected results.
KleenAir Systems, Inc. (KleenAir) is a NASDAQ OTCBB company trading under the symbol "KAIR" and is located in Irvine, California. The company has 16.4 million shares outstanding and has a market cap of approximately $18~20 million. The 200 day average daily volume is about 35,000 shares. Its web site is www.KAIR.com. The company is projecting annual revenue to be in excess of $100 million within five years and to be EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) positive next year rising from 8% of revenue to over 25% of revenue in its fifth year.
KleenAir is dedicated to the development, testing, and commercialization of products designed to help reduce smog and air pollution in the environment by reducing the emission of nitrogen oxide (NOx). Nitrogen oxide reacts with sunlight in the atmosphere to create ozone. The principle initiative of KleenAir is the NOxMaster® System, which is an electro-mechanical device that substantially reduces the amount of NOx in gasoline and diesel exhaust. KleenAir owns the patents on which the NOxMaster® Systems are based.
The type of business that KleenAir is targeting at the outset is known as an after-market part or the diesel retrofit marketplace. The NOxMaster® is designed to be added to the exhaust system of any existing mobile or stationary source up to Two Megawatts of power. The market segments that KleenAir plans to reach are the government mandated NOx reduction programs and the Emission Trading Credit Programs.
On Friday June 7, 2002, the Office of Management and Budget (OMB) and the Environmental Protection Agency (EPA) released a statement agreeing that curbing pollution from diesel-powered non-road vehicles and equipment should be a top environmental priority.
KleenAir is at the cutting edge of Selective Catalytic Reduction (SCR) technology that significantly reduces nitrogen oxides. It has received an Executive Order from the California Air Resources Board (CARB) for the use of its NOxMaster® System for diesel-powered non-road vehicles and equipment.
THE PROBLEM
The U.S. EPA tracks emissions of six principal air pollutants: carbon monoxide, lead, nitrogen oxides, particulate matter, sulfur dioxide, and volatile organic compounds. All have decreased significantly since passage of the Clean Air Act in 1970 - except for nitrogen oxides (NOx), which has increased approximately 10 percent over this period.
NOx is the generic term for a group of highly reactive gases, all of which contain nitrogen and oxygen in varying amounts. Many of the nitrogen oxides are colorless and odorless. However, one common pollutant, nitrogen dioxide (NO2) along with particles in the air can often be seen as a reddish-brown layer over many urban areas.
Nitrogen oxides can travel long distances, causing a variety of health and environmental problems in locations far from their emissions source. These problems include ozone and smog, which are created in the atmosphere from nitrogen oxides, hydrocarbons, and sunlight. Nitrogen oxide emissions also contribute to the formation of particulate matter through chemical reactions in the atmosphere.
Nitrogen oxides form when fuel is burned at high temperatures, as in a combustion process. The primary sources of NOx are mobile sources, electric utilities, and other industrial, commercial, and residential sources that burn fuels.
NOx is the most difficult exhaust pollutant to control. NOx is not fuel based but is produced by the oxidation of nitrogen in the combustion air and their formation requires high temperatures (2500 degrees F and above). The higher the temperature, the more NOx is produced, thus NOx is produced in proportion to engine power output and efficiency.
STATE & FEDERAL SOLUTIONS
The Clean Air Act requires every state to provide air pollution control programs that significantly reduce both emissions and ambient ozone concentrations. This compulsory plan, known as the State Implementation Plan Program, addresses the individual state's Clean Air Act obligations to address emission problems.
Although the Act does not mandate how the reductions are to be achieved, the EPA gives each state a NOx emission target. States have flexibility in determining how to reduce emissions. The goal is to reduce total emissions of NOx by 1.2 million tons by 2007.
The U.S. Environmental Protection Agency has a plan to significantly reduce pollution from new diesel engines. It is a two-step approach that first set new emission standards for diesel engines that will take effect in 2004. In the second step, EPA has established even more stringent emission standards for these engines beginning in 2007, in combination with a reduced level of sulfur in diesel fuel.
Since these rules will not take effect for two more years, the EPA has developed the Voluntary Diesel Retrofit Program to help make a difference immediately. The program addresses pollution from diesel construction equipment, generators and heavy-duty vehicles that are currently in use today.
EPA publishes a Verified Retrofit Technology List to allow states, cities, private companies, and other entities to easily select appropriate retrofit equipment that will result in quantifiable emission reductions. This list describes each retrofit technology that has been through EPA's verification process as well as the engine families and models that are compatible with each retrofit kit.
KLEENAIR SYSTEMS, INC.
Originally, the Company incorporated under the laws of the State of Nevada on February 4, 1986, in the name of Covington Capital Corporation. From 1989 through 1993, the Company underwent a series of name changes in order to explore various business prospects. However, none of the business opportunities were successfully completed.
In April 1995, under the name of Investment and Consulting International, Inc. the publicly held Company acquired a patent for a proprietary device designed to neutralize nitrogen oxide emissions from a privately held Company known as KleenAir Systems, Inc. Simultaneously with the acquisition of the patent; the Company acquired the right to use its corporate name.
KleenAir Systems, Inc. has been primarily a Research and Development company since its inception and has worked consistently towards the completion and testing of its NOxMaster® System. This course of action led to the issuance of U.S. patents #5,224,346, #5,609,026, and #5,992,141. The NOxMaster® system has also received many European and Latin American patent rights along with patent protection under various international patent treaties
The Company has not been involved in any bankruptcy, receivership or similar proceeding.
The NOxMaster® System
The NOxMaster® System is an electro-mechanical device, which substantially reduces the amount of oxides of nitrogen (NOx) in diesel exhaust and gasoline engines. Over seven (7) years of research has gone into the development of the technology. The purpose of the NOxMaster® system is to reduce the NOx to a level substantially lower than the minimum requirement of even the most restrictive state - California.
The current diesel NOxMaster® System test unit has demonstrated its effectiveness in reducing the NOx contained in exhaust emissions by seventy percent (70%) to ninety percent (90%).
The NOxMaster® system is activitated when certain parameters indicate the production of NOx. The controller then triggers a solenoid causing the injection of gaseous ammonia into the exhaust system upstream from the catalytic converter. The chemical reaction that occurs causes the NOx to be reduced to harmless constituents (nitrogen and H2O), primarily at the initial mixing and secondarily at the converter.
The key components of the NOxMaster® system include the SCR Catalyst, Controller, Pulse Metering DOC Catalyst, Valve, Pressure Regulator, Air Valve, Ammonia Container, Exhaust Diffuser, and hoses and fittings. The Controller, Exhaust Diffuser and Catalyst are the main proprietary components exclusively designed by the KleenAir.
MARKET PLAN
The customer base initially for the NOxMaster® System is known as diesel retrofit or the after-market. This is the sale of products for use on mobile sources after purchase by the end user. The NOxMaster® can be retrofitted to any mobile source exhaust system, i.e., off-road (construction, forklifts), on-road (18-wheeler trucks, motor homes) or non-road (agricultural pumps and generators).
The market segments that KleenAir plans to reach are the major truck fleets, government mandated NOx reduction programs, Mobile Source Credit Program and the Emission Trading Credit Program. The beginning phase for non-road and off-road mobile sources will be through well-established independent distributors in the field. The initial phase for on-road mobile sources will be through direct sales to fleet-owners and through our participation with the American Trucking Association.
Best Available Control Technology (BACT) is the most up-to-date methods, systems, techniques, and production processes available to achieve the greatest feasible emission reductions for given regulated air pollutants and processes. NOxMaster® currently is being evaluated for California BACT. Once proven to the California Air Resources Board that NOxMaster® is significantly superior to existing retrofit technologies in terms of emissions control, the NOxMaster® System will be listed in the BACT Clearinghouse.
Emission reduction (decreases in pollutant emissions) credits are given to recognize actions taken to reduce pollution. The amount of the credit corresponds to the amount and type of emission reduction. These credits are often traded, which involves the transfer of ownership to a company that needs to offset its own emissions.
This method of credit trading was strengthened in February 1997 when inter-credit trading enabled mobile source credits, stationary source credits (RECLAIM program) and areas source credits to be cross-traded. This enabled companies to substitute credits achievable at low-cost for high-cost emission reduction requirements.
OEM
It is KleenAir's belief that successful field implementation of the NOxMaster® as an after-sale product to significant fleet operators will be the most effective way of getting the attention of Detroit. No OEM sales have been included in KleenAir projections. A breakthrough with Detroit would represent a quantum increase in unit volume and revenues, plus a major reduction of cost due to economies of scale.
GOVERNMENT LIAISON
A significant part of the Company's marketing strategy is to maintain appropriate liaisons with government agencies, institutions, legislators and trade associations at both the Federal and State levels. It is essential to be in the forefront any new laws, rules, regulations and developments that may influence market opportunities.
ACQUISITIONS
IRVINE, Calif.--(BUSINESS WIRE)--April 30, 2002--KleenAir Systems Inc. (OTCBB:KAIR - news), announced that it has completed the acquisition of Carbon Cloth Technologies Inc.(CCT) a leading supplier of thermal management systems for the automotive exhaust industry.
The CCT product is currently in use on several hundred buses operated by New York City Transit and is being tested on several Los Angeles Metropolitan Transit Authority buses. A number of other transit authorities are also evaluating it. In all these cases, the CarbonGuard™ is being used to enhance the performance of and extend the operating life of particulate traps.
It is anticipated that KleenAir's unique computer controlled ammonia injection system for the reduction of Oxides of Nitrogen (NOx), can be easily retrofitted to such vehicles to eliminate the substantial amount of NOx generated. For every $1,000 of CarbonGuard™ sold, it is believed that KleenAir can generate $10,000 of NOxMaster® sales.
CCT initially developed thermal solution products for the motor sports industry. Many racing teams in Formula 1, CART, World Rally and NASCAR utilized these "state-of-the-art" thermal barrier systems to optimize engine performance in very extreme, heat intensive, racing conditions.
Ferrari, Ilmor Engineering, Mercedes-Benz, William F-1, Turbo Garrett, Penske Racing, and John Force Racing were instrumental in perfecting these systems. "We are very excited by the synergy and system development opportunities presented by this merger," said Beau Gooliak, president of CCT and now also director of marketing for KleenAir Systems. "By creating a total system for enhancing particulate and NOx reduction I believe we are making a giant step forward in the goal of improving public health through the reduction of pollution-causing automotive emissions."
IRVINE, Calif.--(BUSINESS WIRE)--June 10, 2002--KleenAir Systems Inc. (OTCBB:KAIR - news), announces that it has signed a Letter of Intent to acquire controlling interest in a Ford tier one automotive supplier located in Detroit. The acquisition is expected to close by September.
The company has annual sales of approximately $7 million and profit of over $1 million. It provides product development and engineering services as well as manufacturing prototypes and precision components for most of the major automotive OEMs.
The new acquisition will add additional proprietary technologies geared to pollution reduction as well as significant access to potential OEM users of these technologies. It is expected that KleenAir will open a Technology Center in Detroit.
LICENSING
The Company will establish license arrangements in the United States and wherever the opportunity arises. Such licenses are expected to be with established distributors, particularly those purveying exhaust treatment systems to both the OEM and Retrofit markets.
INTERNATIONAL SALES
The Company has transferred non-US diesel rights and European gasoline rights to an off-shore Company called KleenAir Systems International, Inc. (KSI) in order to take advantage of international trading opportunities in exchange for 30% of the ownership rights in that company plus an 8% royalty. KSI has established a company in the United Kingdom to assist with the development of the European rights. This Company, entitled KleenAir Systems, Ltd., is 100% owned by KSI and has a distinguished Board of Directors, including the former Group Technology Officer of Perkins Engines Ltd., (now owned by Caterpillar); the former Chairman of Wolsey Hall Ltd.; and the former Company Secretary of the London Daily Telegraph.
MANAGEMENT
Lester Berriman, P.E.
Chairman of the Board of Directors
Director of Research
As a licensed Professional Engineer with a degree in Chemical Engineering from the University of California at Berkeley, Mr. Berriman leads the company in its research and development. Mr. Berriman served twenty (20) years as Manager of Chemical and Mechanical Engineering for the Southern California laboratories of the Stanford Research Institute and seventeen (17) years with Dresser Corporate Advanced Technology Center, which included two (2) years as their Director of the Advanced Technology Center. Mr. Berriman has twenty-one (21) United States patents and over eighty (80) foreign patents in his name. He is one of the co-developers of the NOxMaster® system technology.
Lionel Simons
President and Chief Executive Officer
Mr. Simons attended the London School of Economics, where he earned his Bachelor of Science in Economics and was awarded one of seven (7) Leverhume Scholarships. He received his Masters in Business Administration, majoring in International Business and Marketing, at the Columbia University Graduate School of Business. While Managing Director of Denbyware Ltd of England, a manufacturing company with over 1,000 employees, he increased sales from $10 million to $25 million and took the company public via the London Stock Exchange.
As President of Dunn Systems, a medical imaging manufacturing company with over 150 employees, he increased OEM sales from $3 million to $15 million before merging with a major NASDAQ company. He spent 2 years with Thunder Engine Company, developers of a 600hp heavy duty multi-fuel light-weight aluminum engine, and successfully concluded technology transfer agreements with companies in China, Korea and Canada.
John Zabsky, P.E.
Engineering Vice President
As a licensed Professional Engineer, Mr. Zabsky co-developed the NOxMaster® system technology. He earned his undergraduate degree at the University of Missouri and his Master's Degree in Mechanical Engineering at the University of Kansas. He has worked for Dresser Corporate Advanced Technology Center, Honeywell, Boeing, Rocketdyne and Bendix Corporation. Mr. Zabsky was one of the founders of a successful private materials company, which recently went public, Liquidmetal Technologies (LQMT) of Lake Forest, California. Mr. Zabsky holds nine (9) patents for various mechanical and fluid devices.
William H. Ward Jr.
Member of the Board of Directors
Consultant
As an expert in electronic control systems and instrumentation, Mr. Ward contributed to the controller technology for the NOxMaster® system. He holds a Bachelors of Science Degree in Chemistry. Mr. Ward established and managed the Electronics and Instrumentation Lab at the UC Irvine School of Physical Sciences. As Vice President of Research & Development and a founder of General Monitors, Inc., he designed a successful line of combustible and toxic gas detectors, which became the sole source for Mr. Ward's hydrogen detectors for the NASA Apollo mission. He holds eight (8) patents for various types of sensor and instrumentation devices.
Patrick Sanders
Director of Operations
Mr. Sanders graduated with a Bachelors Degree in Business Administration from the California State University at Pomona. For over 20 years, he has effectively held executive management positions within entrepreneurial marketing companies. Mr. Sanders established a wireless communications company in 1985, developed it into, an award-winning agency with sales of over $5 million a year. He also represented the Cellular Trade Association (CATA) a trade group with membership of 600 agents and affiliates throughout California for two years as secretary and government liaison.
While President of MedTel, Inc., a marketing firm for solution-based services benefiting the Home Healthcare Industry, he co-developed field data collection products. He also assisted in acquiring a $100 million contract with the second largest healthcare company in the U.S. As President of a public telecommunications company, they established a telecom network to Mexico to transport wholesale international voice traffic and secured all contracts for voice services while managing the completion of the network.
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P. O. Box 510518, Punta Gorda, FL 33951
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