Message from Charles Payne: google.com
Part of Wall Street Strategies 11-year success has been the company’s ability to identify investment opportunities long before the “street” discovers them. As a result of this fact publicly traded companies of all strips contact us on a daily basis in order that we may tell their story. On average we receive one call or due diligence package per day. While they make for interesting reading (and actually serve as a library of knowledge on virtually every industrial category) we usually file them. Fortunately or unfortunately depending on how one looks at it, our past success have risen the bar and therefore we want to make sure that any company that we chose to give assistance to via consultancy, advise and guidance will have a better than average chance of not only becoming a winner but a homerun. With Constellation 3D I feel like Reggie Jackson at the plate in early October. Sure the company faces some obstacles, but the potential is obvious and exciting. *Wall Street Strategies is providing CDDD with consulting in an effort to introduce the company to a new audience that will lead to greater recognition and perhaps funding and exposure to larger firms on Wall Street. During that time I think the company will find a greater (read: major wire house) backing and recognition on Wall Street and in the world of technology. I don’t want to tell clients, associates and the media to just “buy” the stock only on my word. Instead I invite all to read this report, learn about the technology and potential and then “buy” the stock.
Share Price: $6.10
52-Week share price range: $3.50 to $24.50
Average Daily Volume: 138,000
Total Outstanding: 45.4 million shares
Estimated Float: 14.5 million shares
Institutional Ownership: 10%
Total Assets: $12,500,000
Total Liabilities: $5,400,000
Shareholder Equity: $7,100,000
Public Since: April 1999
Stock Symbol: CDDD
Background:
The company was founded in 1994 by scientists from the former Soviet Union, later the company gained from the expertise of technology-rich Israel. In all the company is staffed by 65 PhD scientists and executives from various successful technology companies. The company’s mission is to develop advanced data storage technologies and products for the consumer, business, education and government applications. Note: Because the company was founded and run by scientist from foreign nations the company has never operated in a fashion that would make Wall Street take notice. Despite that fact the shares have had its moments in the sun because of a cult following among technophiles. As the company is on the cusp of greater success, this area of weakness has been identified and is being addressed. More on that when we get to the topic of management.
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Technology:
From the very beginning the tech world knew that DVDs as we know them would not be the answer to the future needs of removable data storage. However the threat of other advancing -and equally limited- technologies forced the entry of the DVD into the consumer market. However the current DVD is a 2-dimensionaal storage carrier and that limits the amount of information that can be stored. The scientific community realized early on that research efforts would have to focus on 3-dimensional storage and multi-layer technology. Current DVD technology uses multi-layer reflective technology, but the metallic film backing of disc limits the amount of data each disc can contain.
Fluorescent Multi-layer Disc-FMD
The use of fluorescents enables the elimination of the metallic backing and therefore opens the disc to a theoretical unlimited amount of layers. Of course it isn’t that easy but in a nutshell the company’s use of fluorescents is the basis for a revolutionary leap in the data storage industry. Not only has the company magnified the amount of data a disc can contain it has also solved problems of interference, scatter and intra-layer cross talk inherent in reflective multi-layer discs. This breakthrough should ultimately pique the interest of others in the field that earlier abandoned reflective multi-layer disk research. (Philips and IBM were early proponents and Dell Computer sponsored a comprehensive white paper on the potential.) The reason these companies abandoned their efforts is because it is impossible to achieve multi-layer capabilities with reflective layers. However by virtue of the fact that these industry giants attempted to enter this arena I think suggest that CDDD could ultimately become an acquisition candidate. A typical DVD disc with a single layer contains 4.7 Gigabytes whereas a FMD/C has capacity of 100-disc and can contain 400 Gigabytes of data!
Like a conventional CD or DVD data on the FMD layers is encoded on a substrate in a series of geometrical features or volumetric marks, the parameters can be decided by CDDD according to the desired functionality. Each layer is coated with a transparent fluorescent material rather than the reflective metallic layer currently employed in CDs and DVDs. Like current systems the CDDD system involves a laser beam that hits a specific spot on the layer but in this case a fluorescent light is emitted. This light has a different wavelength from the incident laser light and is incoherent in nature (until the read out system filters the light so that only the information-bearing fluorescent light is detected) therefore the emitted light can transverse adjacent layers undisturbed. This means that the signal degradation (one of the many obstacles to trying to multi-layer conventional disc) occurs much slower with fluorescent read-out systems that in turns allows for additional layers. In fact research has shown that media containing up to a hundred layers are currently feasible, meaning a single card or disk can handle hundreds of Gigabytes. In fact the use of blue lasers would increase the capacity to over 1 Terabyte. Currently CDDD is focused on the use of red lasers in part because they are currently used in CD/DVD players. In order to achieve rapid acceptance the company understands that the CDDD/FMD drives must be “backward” compatible. In other words FMD players will read current CDs and DVDs.
Applications/Products:
FMD technology requires only relatively minor changes of existing components and processes from high volume CD and DVD production and avoids the need for new infrastructure for media and drive production. In fact the number of process steps per layer is reduced because a reflective metallic layer is not required. So many technologies are left on the drawing table because they would require radical retrofitting of entire industries from plants to finished products. In this case the consumer will still use discs and players will essentially resemble those currently in use. The manufacturer can actually produce the product cheaper than CDs and DVDs.
Products include a family of CD-sized multi-layer disc with capacities up to 100 Gigabytes. The annual market for removable CDs and DVDs reached 12-billion units in 1999. According to the Consumer Electronics Association DVD players are the “fastest selling consumer electronics product of all time”. The increased download speeds of the internet mean that there has to be a more robust and reliable generation of multimedia applications.
DRIVERS
One of the driving forces behind the consumer electronics industry’s interest in FMD is the onset of High Definition Television. Studios and content owners will require high capacity media for the distribution of their HD content, and DVD simply can not meet the market requirements which are expected to be 30 + Gigabytes on a single disc. HD will happen and has been mandated by Congress to be a standard by 2006.
A second driving force is the media requirements of the growing Digital Video Recorder or PVR Market. In this market a high capacity recordable media is required to provide consumers with the archiving ability that hard disc based systems lack. In addition to Ultimate TV (a Microsoft company) and Tivo, cable and satellite companies including Echo Star, Direct TV, Sky TV, AOL/Time Warner have introduced or will introduce soon systems that allow consumers to digital record broadcast television. To date the products release have failed to meet consumer demand, because the hard disc is not transportable, is expensive on a per gigabyte basis. By adding a recordable FMD to their products this firm will be able to give consumers the in effect unlimited inexpensive storage they became accustomed to having in VCRs.
To penetrate the HD market the company is taking an interesting approach: Digital Cinema. As studios convert from the film distribution of their content to digital distribution they will require a single disc capable of providing the 70+ GB required by a single Digital Cinema feature film. By meeting this market need CDDD will generate substantial visibility both with content owners (read: Movie studios and Games developers) and consumers. Dolby used a similar technique to enhance its visibility with consumers.
Many believe FMD may be the sole technology capable of providing a single removable device for the Digital Cinema Market. The replacement of traditional cellulite prints with digital alternatives could save the industry $600 million a year and generate substantial visibility for the company and it’s technology.
The numbers aren’t in, but the use of the company’s technology in Corporate Archiving could dwarf all other uses-combined. A 200GB, 300MM FMD WORM disc with read/write times of up to 40MB/sec and 30MB/sec is currently under development by CDDD.
FMC Clear Card Products
The company is developing its first generation of card products, a family of credit card-sized memory storage devices for use in mobile applications. The CDDD “Clearcard” should have capacities of up to 10 Gigabytes and offer tremendous per-gigabyte cost savings versus current technology. Flash storage, the primary storage medium used in these devices generated an estimated $15 billion in revenues in 2000. The storage demand in these markets is rising at a rate of 60% per year. The space includes hot growth industries like MP3 players, 3G cellular phones, e-books and Digital cameras. Not to mention portable video games, PDAs and Laptops. In fact digital cameras and digital video cameras have already seen the market explode to 19-million in use now.
Currently Sony makes a Memory Stick which holds about 50 high resolution digital images and retails for well in excess of $100.00.
In summary the company has the right product at the right time. The technology world is looking for a way to leap forward. There has to be answers to meet the demands of the avalanche of data that is right around the corner via broadband delivery to computers and wireless devices. CDDD is poised to deliver the solution needed in an array of industries that generate over $100 billion a year in revenue.
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Management:
Dr. Eugene Levich – Chairman, President & CEO – has been a Senior visiting Fellow at Oxford University and an Associate Professor at the Weizman Institute of Sciences. Dr. Levich has also served as a Professor at the faculties of Physics and Engineering at the City University of New York.
Steve Haddad – Senior Vice President of Business Development and Marketing – was most recently Direct, Storage Products Advanced Business Development for Texas Instruments (TI). Previously, he was Marketing Direct of the Hard Disk Drive Business Unit at TI. Prior to joining TI in 1995, he was a Worldwide Major Account Manager for Mentor Graphics. From 1979-1993, Mr. Haddad worked for Digital Equipment Corporation, where he held a number of senior management positions.
Ray Tellini – VP of Finance – comes from e-media Inc., where he served as CFO and VP of Finance. Mr. Tellini assisted in raising $42 million in financing for e-media, including from Microsoft Corporation and EMC Corp. He was also a Manager in the Corporate Finance Practice division of Coopers & Lybrand from 1987-1994. Mr. Tellini is a CPA and holds an MBA in Finance from New York University.
Leonardo Berezowsky – Chief Financial Officer – was previous the Chief Financial Officer of Solmelcs and Chief Operating Officer of Mutek solutions, Ltd. Mr. Berezowsky holds B.A.s in Economics and Computer Sciences, and an M.A. in Economics, from the Hebrew University in Jerusalem.
Vladimir Schwartz – Chief Technology Officer – received his MSc. in engineering from Moscow University. He has worked as a research and development engineer at Texas Instruments, and has served as CEO of both Nobler Technologies Inc. and Reflekt Technology Inc. – firms which design and manufacture optical disc manufacturing equipment. He has worked in the media replication industry sine 1988.
Michael Goldberg – Direct of Legal Affairs – an Asper Fellow, University of Maryland Law School, and a former Asper Fellow at the Criminal Division of the U.S. Attorney’s office in Washington, DC. Mr. Goldberg has also served as an Assistant D.A. in Philadelphia and as the Chairman and CEO of Rx Medical Services.
Dr. Jabob Malkin – Senior Scientific Advisor – previously a Professor of Physical Chemistry at Moscow Lomonosov Institute, a Gastella Fellow at the Weizman Institute of Sciences and a British Royal Society award winner.
Dr. Ingolf Sander – General Products Manager – a specialist in analog & digital electronics, optics and servo systems. Dr. Sander has a Ph.D in physics from Hamburg University and has been the Director of R&D at Verbatim-Kodak. He is also the Founder, President & CEO of LaserByte Inc.
Dr. Mark Alperovich – Chief Chemist – previously a Professor of Chemistry at Moscow State University, Dr. Alperovich has published 230 papers, received numerous patents and has made significant contributions in the field of photochemistry and its application of data storage technology.
Patents:
The company has over 100-patents that have been granted or are pending in relation to fluorescent multi-layer technology. These patents cover FMD drives, construction, pick-ups used and lasers for WORM and ROM drives. Other patents cover the manufacturing of WORM and ROM media and ROM and WORM disc and card structures. In the U.S. key patents owned by CDDD include the following:
· U.S. Patent No. 5,847,141, entitled “Photochromic Material for Electro-Optic Storage Memory,” which issued on December 8, 1998 and which expires on December 22, 2015. This patent covers photochromically modified pyridones which are useful in three dimensional, stable, optical memory storage devices.
· U.S. Patent No. 5,936,878, entitled “Polymeric Photo-Chromic Composition,” which issued on August 10, 1999 and which expires on December 12, 2017. This patent covers the use of photochromically modified spiropyrans in three dimensional, stable, optical memory storage devices.
· U.S. Patent No. 5,945,252, entitled “Photochemical Generation of Stable Fluorescent Amines from Peri-Phenoxiderivatives of Polycyclic P-Quinones,” which issued August 31, 1999 and which expires on December 11, 2017. This patent covers the use of photochromically modified polycyclic quinines in three dimensional, stable, optical memory storage devices.
· U.S. Patent No. 5,982,740, entitled “Dry Bonded Digital Versatile Disc,” which issued on November 9, 199 and which expires on November 25, 2017. This patent covers a disc for storing digital information comprising a plurality of adhesively bonded sub discs.
· U.S. Patent No. 6,009,065, entitled “Optical Pickup for 3-D Data Storage Reading from the Multilayer Fluorescent Optical Disk,” which issued on December 28, 1999 and which expires on December 4, 2017. This patent covers an optical pickup capable of reading binary optical information from a multiplayer fluorescent disk.
· U.S. Patent No. 6,027,855, entitled “Photo-Chemical Generation of Stable Fluorescent Derivatives of Rhodamine B,” which issued on February 22, 2000 and which expires on December 12, 2016. This patent covers a method for optically recording information in a three-dimensional memory system having an active medium which includes a Rhodamine B compound.
· U.S. patent No. 6,039,898, entitled “Optical Memory Device and Method for Manufacturing Thereof,” which issued on March 21, 2000 and which expires on October 22, 2017. This patent covers a method of making an optical memory device comprising one or more layers, each having a patterned surface with spaced regions for receiving fluorescent material capable of recording and transmitting data.
· U.S. Patent No. 6,071,671 entitled “Fluorescent Optical Memory,” which issued on June 6, 2000 and which expires on October 6, 2017. This patent covers a method for making an optical 3-D memory device having a plurality of layers, each carrying fluorescent material which can be reversibly rendered non-fluorescent by electromagnetic radiation for storing and recovering data.
· U.S. Patent No. 6,080,288, entitled “System for Forming Nickel Stampers Utilized in Optical Disc Production,” which issued on June 27, 2000 and which expires on May 29, 2018. This patent covers a system for electro depositing a metal layer on a substrate using a rotary jet planarizer.
Media/Industry coverage:
To date there have been over 150 articles written about the company in well-known publications promoting FMD technology.
Business 2.0 said “a few years from now, consumers may be able to stick a 10GB record-able CD the size of a business card into their cameras and use it to store as many as 2000 high resolution photos”. The same article went on to highlight CDDD’s entry in the digital cinema, personal video recorder and enterprise storage markets.
Computer World sited the company’s FMD technology in an article penned in April 2001.
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Licensing and Joint Ventures:
Current Letters of Intent are in place with
Nippon Zeon- a world leader in specialty polymers
Ricoh Corp- for WORM media and drive development.
Steag Hamatech- a leading developer of optical disc manufacturing equipment.
Toolex International- a former subsidiary of Philips Electronics- for optical media mass-manufacturing equipment.
Lite-On Corp- the third largest manufacturer of CD/DVD drives in the world.
Plasmon- a world leader in record-able optical disc technology.
THE LAST HURDLE
Two weeks ago the company announced a major joint development contract with WAMO. The news firm the share price, but didn’t provide the kind of spark that would have been commensurate with the magnitude of the news. For one some of the long-time share holders of the company became impatient and threw in the towel after the shares dipped below $5. Another problem with the news is that not enough people understood the significance. WAMO is a division of AOL/Time Warner. This is the company that created the DVD. The deal satisfies three important needs of the company.
· The company receives development for mass production process.
· The company gets the facilities where the disc can be mass-produced.
· The company gets the backing and muscle of AOL this is the most important part of the puzzle. It solves the need for a powerhouse to establish the standards under which CDDD can become a household product.
Conclusion:
Wall Street Strategies received 30,000 shares of stock and $40,000 in return for assisting the company in its quest for an ear on the Street. However we receive a dozen due diligence packages a week and rarely take on any consulting assignments. However we really believe this company has the goods and the stock could be a grand slam winner. Technically, the shares have little resistance up to $5. From there it faces a wall of resistance that sees a major breakout through $6 beyond there it could re-test $10. |
