Kit and all. Here's the first edition of my report of the meeting.
Well, I'm VERY impressed and excited about this company, moreso than ever. I talked for a long time with Dann Deaver and Ken Kurple (mostly with Deaver) and, from what they said, there are even more exciting prospects for Lenox than I knew about heretofore. Here's a 12-point summary of my take
on the talk and what it means for Lenox Polymers.
1) New discoveries. They call their purified resin Xyloy, and, since it's basically a new material they are still discovering applications for it. We've heard of applications as a binder for sand moulds and cores in the foundry industry, as a binder of wood in particleboard and plywood, and as a binder of organic fibers to replace various plastic parts. Now it's been shown to also bind with glass fibers in a way superior to petroleum resins -- far superior -- resulting in a superior form of fiberglass. Similarly, it makes a superior kevlar. Superior how? All the ways we've been told about before and more: a) it takes less energy and less resin to achieve the result, b) the result has superior strength-to-weight ratio, c) the result has better water repellent characteristics, d) the result has better fire resistance characteristics, e) these superior qualities are preserved through a wider range of temperature environments.
And, to produce products using Xyloy instead of current petroleum-based resins requires no change in current manufacturing processes.
2) I don't believe I've mentioned it, but they confirmed one rumor I'd heard that they are working with Delphi, the parts arm of GM, on testing and developing parts made with Xyloy. One part in particular that they talked about is an application for the new fiberglass: a car's package tray. The package tray in a car is the part above and behind the back seat and below the rear window -- the flat surface. That part is subject to some of the most extreme environments of any parts in the car, because of solar radiation. Xyloy based parts would be more durable, more stable, and stronger than what is currently used. Thus, they'd require less engineering.
3) Burn resistance has been confirmed. In all applications, Xyloy-based products are more burn resistant than current ones. However, testing of some is still going on, to see if they can get a UL rating. That would be fabulous. My impression is that to a considerable extent, the burn qualities are a function of the formulation of the product's resin content.
4) A demonstration of the superiority of Xyloy-based particle board. Current particle board is not very water resistant. In mobile homes and other places, particleboard is sometimes used as flooring or wall material. If there's a water heater or bathroom or sink nearby, it's easy for water to come into contact with it, especially if there's a leak. If you have any experience of this, you know what happens. The wall or floor eventually just crumbles apart. They had some ordinary
particle board that they'd put into water for an hour -- or rather the crumbled-up remains of it -- in a bag. They also had a piece of Xyloy-based particle board, which had been put into boiling water for an hour. The Xyloy-based particle board was unaffected.
5) Attendance at this meeting was about double what I recall at the first meeting -- about 50 people were there.
6) They confirmed projections for FY '96 (just ended), of revenues of $550,000 and earnings of $150,000. That means the quarter just ended was huge, comparatively.
7) With the discoveries of the new uses for Xyloy, they've kept their patent machine busy and now have about 28 patents issued and about 12 more applied for.
8) They don't anticipate needing a new factory for another year or two. What they need is a rail site, and they are looking to move to a new site. With a new site that was larger they could move their reactor fairly easily, and then add another with double its capacity as the demand increased. They have a yearly supply of about 500 million lbs. of raw material within a 500 mile radius of their location, and from that they could produce 2 billion lbs. of resin.
9) They offered some estimates of size of potential markets and
possible penetration. In 5 years they think they can have over $200M in revenues....! (This, of course, is only a projection, not a
promise.)
Yes, this is tremendous exponential growth. However, Deaver pointed out that he has done this before. Apparently he took ABS Thermoplastic from nothing to over $200M in revenues in 5 years. (It has since gone on, of course, to be much larger than that.)
They are looking for a HUGE increase FY '97, well over 100%.
Just how much over 100% is subject to the outcome of current
negotiations on new deals. (Remember, just a projection.) They showed a chart with a projection breakdown, but I doubt this is to be made publicly available. I'm planning to check into it further.
10) There are other deals they are working on that are not yet complete, but which they were very excited about. *IF* they come through, it would be VERY positive.
11) They are also discovering other applications and even other products, which they can derive revenue from, out of their black liquor raw material. They weren't much more specific than that -- I think they are still in the discovery-and-patent-aquiring process for some of these.
12) They don't anticipate any need for additional ouitside capital for a couple of years. It looks to me, in fact, that they may be able, if they want to, to fund their growth entirely out of cash flow. However, they also want to get on NASDAQ, and there's a minimum capital requirement for that. They are considering doing a private placement of maybe $1.5M or so in order to meet NASDAQ requirements. That wouldn't be terribly dilutive, but at this point I don't see the need. They are eager to get on NASDAQ. If they get on NASDAQ, they'd most likely pull out of the Canadian OTC, in my opinion. In the course of gathering all the other information I neglected to ask that question.
Regards.
-DT
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