Wrong again, Larry. That was, in essence, what Lev said: that they were directing their efforts towards a small number of large customers.
Further, that they were developing a limited variation of product designs in conjunction with both the OEMs and the repackagers. As they went into design-in programs, where the scientists and engineers talk as much or more than the managers do, there was still no need for an expanded sales staff. Lev had identified the customers, made contact, and established the programs.
Especially since they were only bringing the factory up to speed in stages: sequential setting up of the various pieces of machinery (one facet of which are the machines which cut and assemble the laminate for different types of cells; these are often mistakenly referred to as 'assembly lines' as if they perform the entire operation from beginning to end); and iteratively running each piece of machinery at progressively faster speeds, monitoring the quality of the product and making adjustments as needed. They have now completed that phase, from what Lev is telling us in todays PR. That is indeed a milestone, which is going unnoticed by the street to their detriment.
The only claim the company made last fall was that they were 'on the cusp' of commercialization, and a number of events delayed their mass production of the first product until January. It was then that FRB said they would be 'producing in volume that quarter.' I'll bet you, when we see that quarter's statement, that they have indeed.
As far as 'contracts,' Lev told us at the shareholders meeting that the contract would not be announced as it had been in '94 with Motorola. In that case, they announced the 'intent' to purchase, but the factory had not yet been built which was to scale up the process then developed in the laboratory. Unforeseen problems arose (dendrite formation shorting out the cells upon multiple rechargings), which sent them back to the drawing board.
This time, Lev has said they are already in programs with customers who have gone through many iterations with the company, specifying what their product needs are, and Valence has developed the products currently being manufactured in NI according to what these customers want. When the customers request Valence to begin shipping quantity of product, is this a PO? Well, by usual measures it may be, but again, Valence has said they wouldn't announce this event either. I'll bet you some such events have already transpired.
Lev stated quite clearly that only after the product has been received by the customer, put in the product, and Valence has received revenue, would they then announce THAT event 'within a few weeks.' THAT is what we are waiting to hear about, when we say we are waiting to hear about a 'PO.' And I'll bet you we get it within 4 weeks, certainly well before any financing issues arise.
And how about those financing issues? We're past March 31st and no word yet. If that truly was the 'drop dead' date, and there was no hope of imminent production, we'd have heard about terms of some new bond issues. But we haven't. They must be getting funds from somewhere. I will once again add that I don't believe you'll hear of any more convertible bond issuance to raise money. The strongest likelihood is that they've begun using the $7.5M from Berg, which had conditions attached to it that there be a 'letter of intent' from a customer. The structure of the loan was to serve as a bridge between initial production, and receipt of revenue both from the customers and from IDB (you can check the wording on that: the amount loanable tapers according to how much IDB money they've received). But we won't know of this until after the fact, either through the conference call associated with a PO, or the CC to discuss the Q4 and annual statement, which won't file until end of June (CC following that).
So the truth is, Herbert, Fred, and the others are right on: Now, as they begin producing on a regular basis, and in larger quantities, and serving more customers, they do need a sales force. But it does not mean that they are only now going to go searching for customers. As pointed out above, they've been working with many of them for 6 months or more (from the guidance Lev gave us at the meeting Feb 4th).
Another way to look at that last part is: before, the customer interaction was more in the mode of defining 'what' would be made, and verifying it satisfied the customers' needs; now the attention turns more towards 'when,' 'how many,' and 'at what cost?' The former task needed more scientists and engineers than managers; the latter task needs an expanded sales force.
Oh, and by the way, you paraphrase SEC document statements, saying they will not be able to sell products until they have an adequate marketing presence in place. But if 'POs' are announced soon in the way described above by Lev, that contradicts your interpretation, because the 'sale' was performed long ago already.
It is indeed sooner than you think. |
