Conference Call notes:
First off, I'm typing this on the "fly" so please forgive any/all typo's, mis-statements, etc.. Okay, here we go...
After the introduction Lev Dawson took over with the statement he's in Seoul Korea and has been in Asia since the Chinese New Year. While being there VLNC has completed the DOCUMENTATION of licensing agreements and has also completed the documentation of a corresponding presentation they'll be using to present to some future potential licensees.
While in Korea he's visited with Endyon (spelling?), a corporation who's providing batteries to Samsung. He'll be visiting Panasonic in Japan tomorrow, along with other licensees there as well. He is expecting to sign "very shortly" as the licensees will be reviewing the documentation. Lev is expecting licensees revenue this quarter although he doesn't expect up front payments
VLNC is concentrating on those manufacturers with sufficient "muscle," with muscle defined as them having at minimum $30 Million in paid-in capital. VLNC is assuring the potential licensees they will NOT be competing against these folks, assuaging that concern of the licensees.
In the royalty area Lev stated he's expecting to reduce the current 8% royalty for the cobalt oxide as that's now "obsolete technology." The Maganese Oxide will get higher royalty rates (than the 8%?) but he didn't mention numbers. Phosphates, the technology to come, hasn't been calculated from a royalty standpoint as yet. The first phosphate samples are going to licensees in the March/April timeframe. Lev is clearly "high" on the phosphate technology, mention its costs as being $5/kilogram with projected costs to be even less over time.
With regard to the films Lev stated the major corporations he's spoken with expects VLNC to provide the film for at least the first year. He then went into the Q&A:
1. How many licensees are there? 16, of which 12 are still active with 2 actively producing batteries and 3 others having problems manufacturing. In addition 2 major corporations have approached VLNC, along with 1 smaller entity.
2. NI production question: He's expecting PDA order(s) "in the next few weeks" and continued ramp-up over the next fiscal quarter. Battery shipments will be up; laminate shipments will be dropping off because Alliant is asking VLNC-NI to build their batteries for them (therefore they're not buying laminate). This is what VLNC is currently doing. The Fable machine has been running "flat out" on this production for "weeks."
3. Question about production rate out of NI. It can easily do $200 Million a year (one year from now once the additional equipment is in place).
4. Have any backlog orders "evaporated?" No, the orders are on the books and are going to be processed. The French order has had a size change. The French are moving all their cellphone manufacture to China, which lends itself to perhaps moving some production to the licensees in the Asia area.
5. Question on China order and its status. Hanils quality is now first rate. Lev has no qualms about them at this time. Hanil has also submitted batteries to some local OEM's, and gotten very high ratings. Batteries have also gone to China for approval. Once approval is rendered production will be initiated. Hanil will not remain a joint-venture partner. They haven't made the change yet, but are working it through right now. VLNC will hand back their shares which Hanil can use to raise money to increase production, etc.. However they play it VLNC will be "hands off" and simply be providing laminate, consulting, etc..
6. Will the Chinese products come through Hanil, or another producer. It may be through another Hanil.
7. Question about Telecordia "lock up," and why isn't it a reflection in the 10K. Telecordias shares are free to trade.
8. Question about other assets mentioned in Bergs daughters Trust announcement. Certain Berg instruments which allowed Berg a more favorable tax treatment.
9. Question about receivables and inventories. Jay King, the 10Q will be out in the next half-hour. Account receivables are current. They won't mention who the customers are....
10. IDB monies received? VLNC has $30 Million in CLAIMS in, of which certain percentages are due VLNC. Bottom line is the money was due some time ago, but it's still working its way through the IDB governmental body.
11. Comment on Ultralife and ULBI's commentary about being in "regular communication." Lev stated they have a meeting scheduled with them next Tuesday or Wednesday, and that they're in communication with ULBI, but he didn't go further.
12. Question of cost of sales: Cost of sales is going down as quality of manufacture go up. 4 packaging machines are up and running with 2 more coming in from the German manufacturers. R&D costs are increasing because they "have a lot going on there....we've made some real break-throughs in the phosphate area, etc., etc."
13. Question on Quantum order? VLNC is currently shipping the order "as we speak." They haven't announced the size of the order, "nor can we."
14. Is Toshiba using any of VLNC's patents? Can they mass produce? Lev hasn't visited Toshiba so he doesn't know which technology they've announced.
15. Question about the media questioning VLNC's ability to produce. Lev and the questioner basically blew this one off and went on to talk about manufacturing capability, Malaysian ramp up capability, etc.
16. Given current stock price have they considered any buyout requests? Lev just chuckled and said he sits on the board, etc., and gave the VLNC "we're the best" speal.
17. Question about capital requirements to start up phosphate battery production. First, nobodies resistance to phosphates. The cost, at 32 metric tons per month, is ~$2 Million to ramp up.
18. Revenues in December quarter reflect any royalties? No.
19. Can you break-down the $3 Million projected for the next quarter. Licenses will take over, with battery production down a bit. The following quarter should see battery production back up. Hoping to ramp up NI material sells to the licensees.
20. Phosphate perceived as staying at the fore-front for the next 2-3 years? Lev stated phosphate is the first new cathode material to come along in 20/30 years, and VLNC has the edge in it. Second question: Any way to project the volumes produced by the Licensees. Lev, they're not messing around. Production should be in the millions per month.
21. Given what you do know about the existing operation people will be converting to your technology/materials how long do you see it taking to convert to produce VLNC-styled batteries? Lev-Very little of existing lith-ion manufacturing technology can be re-used. However, the manufacturing equipment needed is cheaper. If you're a very sophisticated manufacturer needing a mechanized set up it might take 10(?) months, perhaps as long as 20 months to get it running to their satisfaction.
Lev then went on to closing remarks. They're very excited, and had no idea the magnitude of manufacturing technology already "out here." All licensees visited so far have been very positive, etc., etc..
That concluded the call.
Caveat-My apologies in advance for any typo's, mis-statements, etc.. Thoughts, changes, additions anyone?
John~ |
