Isonics Corporation Issues Letter to Shareholders
GOLDEN, Colo.--(BUSINESS WIRE)--March 22, 2001--Isonics Corporation (NasdaqSC: ISON/ISONW) and (Frankfurt: IO9), a leader in the development of isotopically pure silicon-28 wafers for semiconductor device manufacture, is mailing the following letter to its shareholders.
Dear Shareholder,
I am writing this letter since a number of you have had questions regarding our dispute with Eagle-Picher and our ability to continue silicon-28 development in light of Eagle-Picher's inability to deliver silicon-28. In general, we are better off than it might otherwise seem.
First, we are very excited that production of isotopically pure silicon-28 has recently been demonstrated using an advanced version of the proven Russian gas centrifuge. These new machines have several times the production capacity and are capable of utilizing a more convenient chemical form of silicon as raw material than used previously in Russia.
As a result of this manufacturing breakthrough and new cost structure, we believe we will be able to meet cost targets for certain segments of our target market for silicon-28 prime bulk wafers and will be in an improved cost position for our present silicon-28 epitaxial wafer products. The savings will accrue from a combination of lower silicon-28 isotope cost and reduced costs to convert the silicon-28 into polysilicon metal, a necessary step in producing bulk prime isotopically pure wafers
This advanced technology is now deployed in certain Russian facilities and is available for expansion to any capacity the market requires. We are negotiating an order for replacement of the 200 kilograms that Eagle-Picher failed to deliver, as well as several additional tons to more aggressively pursue our silicon-28 prime wafer program.
Unfortunately, our relationship with Eagle-Picher has not proved to be as satisfactory as we anticipated when we completed our agreement with them in December 1999. At that time, we sold our Depleted Zinc (DZ) business to Eagle-Picher and we purchased 200 kilograms of silicon-28 from Eagle-Picher for delivery in 2000. Since then, Eagle-Picher has failed to deliver any of the promised silicon-28, it has failed to make payments due to us related to the DZ business, and Eagle-Picher is attempting to blame us for what we believe are their own shortcomings. We do not believe that Eagle-Picher's claim, that they are excused from delivering the silicon-28 because of their technical inability to produce it, has merit; nor do we believe that belated counter-claims related to the DZ business asserted by Eagle-Picher have any merit. We cancelled Eagle-Picher's 3.1 million shares in February 2001.
We have had numerous discussions with Eagle-Picher management and have met with a mediator, all in attempts to resolve these issues. The next step we are considering is binding arbitration as required in our agreement. If we proceed to arbitration, we expect to claim a significant amount of damages from Eagle-Picher. While any possible arbitration award is only speculative at this time, our attorneys tell us we are in an excellent position to recover substantial damages.
We have been advised by Eagle-Picher that they are diligently working to solve their technical problems. We believe that Eagle-Picher wants to produce silicon-28 at the earliest possible time. Eagle-Picher appears to recognize the enormous economic potential of silicon-28, and we believe that they also have the incentive to mitigate their damages to Isonics. If they are successful, Isonics will be in the enviable position of having multiple sources of supply for silicon-28. Competition between suppliers should further reduce isotope cost and drive the overall commercial success of silicon-28.
On the customer front, we are finding increased interest from certain customers. The industry trend of increased heat generation in high performance microprocessors and its concomitant problems is becoming very real. Earlier, I predicted that Isonics would sign one or more licensing or joint development agreements with major microprocessor manufacturers before April 30, 2001 - I believe we are still on track to do so.
Finally, I would like to remind everyone that Isonics has a very interesting and profitable life sciences isotope business with a number of strategic options. We are working to unlock these hidden values. I look forward to announcing some significant news about this important part of Isonics over the next several months.
In closing, I would like to sincerely thank those shareholders who have maintained their faith in Isonics and have held or increased their holdings while we have been pummeled by the market. I will agree that Isonics has not provided as much exciting news as some of you would like - it's not our style -- but we have been quietly making progress on our plans. We have recently reduced our cash burn through sale of the zinc recovery business and have made certain operating expense reductions, with more to follow.
The Company has weathered some difficult times during our 9-year history and I believe that with our management team diligently executing our plans and with the support of our shareholders, Isonics will not only survive, but prosper and provide the value that our shareholders expect and deserve.
Very truly yours,
James E. Alexander President & CEO |
