First of all, the company re-set their debt during the qtr and added debt and shares thru sales and conversions...that is in the q filed today and you need to be aware of it. But it did give them some breathing room. This outlook covers what drew me to the company and is also from the q filed today.
Outlook
The statements contained in this Outlook are based on current expectations.
These statements are forward looking and actual results may differ
materially.
The Company commenced the shifting of its strategic direction during the
first quarter of 1999. In early 1999, the Company successfully implemented
its proprietary X-traWeb network for integrating wireless solutions with
Internet technologies. The Company's X-traWeb network allows data from a
remote wireless radio frequency (RF) system to be accessed via a secure,
encrypted remote location to simplify the control, access and monitoring of
those devices. Currently, X-traWeb is used to monitor, via the Internet,
data on energy use from an automatic meter reading (AMR) system with
Modesto Irrigation District in Modesto, California. The Company first
received orders for the sale of certain of its X-traWeb products during the
second quarter of 1999.
Applications for X-traWeb in addition to AMR include remote monitoring and
control of wireless supervisory control and data acquisition (SCADA)
implementations in the oil and gas pipeline; environmental control; water
and wastewater management; and heating, ventilation and air conditioning
(HVAC) industries. Other applications include data access and monitoring
for vending machines, medical devices and security systems.
The Company also began the sale of a series of low speed digital radios
(LSDR's) and related devices to third parties in addition to those sold to
Williams Wireless Inc., a subsidiary of the Williams Companies, Inc. The
Company presently has a number of LSDR models available, three of which
(the LSDR 100, the 900 MHz Hopper Radio and the 900 MHz Micro-Hopper Radio)
have been sold to Williams for use and/or testing in the Williams Telemetry
Network.
The Company is focussing its resources on promoting the sale of X-traWeb
products and believes it will achieve significant sales from this source
during 1999, although there can be no assurance of such a result. In
addition, the Company believes it will also derive significant revenue from
its sale of its proprietary LSDR's in 1999, although there can be no
assurance of such a result. Furthermore, the Company believes that it will
continue to derive revenue from its contract design and development service
and manufacturing services, although there can be no assurance of the
amounts to be derived therefrom.
In addition, management believes that as deregulation of natural gas and
other utilities continues, multiple utility suppliers will be serving a
given city, neighborhood, or industrial park. Consequently, it will become
more difficult and time consuming for utility companies to read meters as
they will generally not be the provider to every user in the city or
neighborhood which will increase the cost effectiveness of reading utility
meters remotely. Management believes that the Williams Telemetry Network,
described in detail in the Prospectus dated February 17, 1998, is a viable
alternative to the current practice of manually reading meters.
Additionally, management believes that William's position as an affiliate
of a major transporter of natural gas in the United States positions it to
successfully market its telemetry network, which currently is designed to
use collector and repeater radios supplied by the Company to gather and
transmit data.
Slower than anticipated market adoption of the Williams AMRS has diminished
projected revenues from the original estimates of $70 million over the
years 1998-2000. However, the Company continues to develop and improve
AMRS products under contract with Williams to develop principally two
systems: an Automatic Meter Reading System (AMRS) and a wireless pipeline
Supervisory Control and Data Acquisition Systems (SCADA). Although there
are current negotiations in progress for firm commitments from Williams for
AMRS products at this time, there can be no assurance as to the outcome
thereof.
SCADA
Management believes that deregulation of utilities will also increase the
need for petroleum transporters to monitor and control the distribution of
their product. Management believes that wireless data collection and
transmission systems are optimal solutions for energy transporters whose
pipelines often traverse remote locations not economically served by
traditional communicating systems such as telephones.
The Company has delivered initial quantities of SCADA systems to Williams,
and anticipates receiving orders from Williams for several million dollars
that will be shipped during 1999.
Management believes that the completion of development of AMRS and SCADA
systems, along with completion of proprietary radio products, may result in
significant increases in sales. However, that may lead to working capital
requirements which would not be provided for from funds generated by the
initial sales of the products. The Company is currently pursuing a private
placement to raise equity financing and is investigating ultimately a
secondary public offering to meet its working capital and operating needs.
However, there is no assurance that sufficient capital or any capital will
be raised from such endeavors.
On October 15, 1998, the Company entered into a seven-year lease for a
34,000 square foot facility in West Valley City, Utah. The Company
consolidated its American Fork and Salt Lake City, Utah operations and
staff into the new facility. Management expects the new facility to provide
sufficient manufacturing and office space for the foreseeable future.
However, if additional capacity were required, management would consider
out-sourcing a portion of the manufacturing overload.
If a portion of manufacturing is out-sourced, the Company may lose some
control over the following areas: cost, timeliness of deliveries and
quality. However, by out-sourcing a portion of its manufacturing, the
Company could avoid delays and costs associated with the expansion of its
own facilities. The magnitude of any expansion of the Company's
manufacturing capabilities that is required would be a direct function of
the sales increase and manufacturing overload, both of which are unknown at
this time.
The Company anticipates an increase in revenues from the sale and
manufacturing of the Company's proprietary radio products. The Company will
market a line of radios to OEM that incorporate them into products such as
wireless smoke and security alarm systems, ambulatory patient wireless
monitoring systems, retail point-of-sale systems, and the like. The Company
has begun providing initial sales samples, and believes there is strong
customer interest for the products; however, there can be no assurance that
the Company will be able to manufacture or sell sufficient quantities at
adequate gross margins to achieve profitability.
The Company completed development under a contract with Kyushu Matsushita
Electric Co., Ltd. (KME, which is also known as Panasonic) that calls for
royalty payments upon shipment of certain KME products. Shipments of KME
products containing the Company's technology began during the third quarter
of 1998. Management believes royalty payments from the contract were earned
during the fourth quarter of 1998, but were subject to recoupment by KME up
to the first $600,000 of royalties. Management further believes that the
Company may become entitled to royalty payments with respect to the first
quarter of 1999 (which may be paid during the second quarter of 1999),
although there can be no assurance of such result. Additionally, the
Company entered into follow-on fixed fee contracts with KME during 1998.
It is management's intent that the fees received will cover the Company's
costs. However, these fixed fee arrangements may not cover all of the
Company's costs incurred in fulfilling any such contract.
In anticipation of obtaining additional design and development contracts,
management must continually recruit and hire additional RF (radio
frequency), software, firmware, digital engineers and sales engineers with
RF experience. It is extremely difficult, time-consuming and expensive to
find engineers qualified in those fields. There is no assurance the Company
will be able to locate and hire such qualified engineers. Associated with
the hiring of each engineer, is the need for test and development
equipment, software and workstations, which increases the Company's cash
requirements.
In summary, while management is optimistic about the Company's future, it
is fully aware that anticipated revenue increases from product sales,
design and development contracts and royalty income are by no means
assured, and that if such increases do materialize, the requirements for
capital are substantial, for which there is no present commitment.
Moreover, there can be no assurance that such capital or other financing
will be obtained when needed, or, if so, on terms acceptable to the Company. |
