Letter To The Shareholders
A Periodic Report - November 2007
Another quarter has passed and I wanted to add some qualitative content to the hard data we have released since last quarter.
As you know, our strategy is simple; use funded research to enhance the value of our IP portfolio while covering the costs of doing business until recurring revenue sources develop from IP licenses. I don't think there should be any question that we are progressing on this plan. Our year to date results of sales of $2.922 million and a loss narrowed to $3.335 million are significant improvements from any prior period. Perhaps more telling is a revenue backlog that now stands at $4.5 million with additional contracts in negotiation.
To continue to grow the research portion of a business we now have the largest and best organized sales effort in the company's history. We have both short and long term revenue generating initiatives underway addressing the commercial and government sides of our business.
To insure we have sufficient resources to perform the research we are selling, our research staff is expanding and we have started a long needed renovation of our office and lab areas to make better use of our existing space while increasing productivity.
The above discussion is all about business fundamentals, something that is a requirement of any successful company. You have to have revenue, profits, facilities, people and a sales process to sustain anything else you do. If you are of the belief that we should be on the "press release of the day program" hyping deals without revenue commitments, terms or scope instead of laying a foundation of business fundamentals first, you are probably holding the wrong stock. I will match our way versus any other in the long term, secure in the knowledge that a business built of strong fundamentals always wins in the long term.
Of course, the most exciting part of our business is the prospect of long term revenue streams with no or low costs resulting from licenses for our IP. It is this which supports market capitalization and carries the promise of future stock appreciation.
One potential application of our IP, Canon's planned SED TV offering, generates many of the investor calls that I field. Unfortunately, I have no insights to add beyond what has been previously reported. Canon has its plans which they have not shared with me and an appeal of the legal matters between NPI and Canon is pending. No additional information is available, and I am not aware of any information that we have failed to share.
On other fronts, the progress is easier to report. Our hydrogen sensor development partner is currently building prototype hardware that includes the custom sensor we tailored for them. I believe this is a first. To actually see a product that surrounds our IP is exciting and to see actual testing and plans for product roll out being made is gratifying after the millions of dollars that have been spent in hydrogen sensor development. This partner has a License agreement that provides us with payment for technology transfer and on-going royalties when they enter the roll-out stage. In addition, our sporting goods manufacturing company development partner for Nano-enhanced materials is proceeding to manufacturing trials using the epoxy resin that we modified. We achieved a 40% improvement in the important characteristics of the resin which we believe is more than sufficient to achieve the minimum of 10% improvement they were seeking in the final product construction. This project is also on a path to becoming royalty paying.
NPI's relationship with Mitsui continues to flourish. As I have reported in the past, multiple license discussions are underway as a result of their sales activities. We are working hard to get the first agreement done by the end of the year, but the pace of negotiations is not entirely within our control. While we want to get something done quickly, it is also important to get the best deal possible and not be influenced by an arbitrary date.
Although the sales process is always difficult to predict, I anticipate a successful outcome of the relationship we have with Mitsui in Japan and expect it will expand to other Asian markets based upon demonstrated performance in Japan.
I have nothing additional to report that is definitive in nature. We continue to negotiate an arrangement with a GMOS sensor (initially for the carbon monoxide sensor) development and manufacturing partner and the plodding pace of our major litigation battles continues.
In summary, we are making progress, we are building a sustainable business model, and we appear to be on the leading edge of nano products entering the marketplace.
As always, the management team is open to your questions and comments and I want to reiterate that we are willing to accommodate any shareholder who wishes to visit with us in Austin.
Sincerely,
Thomas F. Bijou
SAFE HARBOR STATEMENT
This press release contains forward-looking statements that involve risks and uncertainties concerning Nano-Proprietary’s business, products, and financial results. Actual results may differ materially from the results predicted. More information about potential risk factors that could affect our business, products, and financial results are included in Nano-Proprietary’s annual report on Form 10-K for the fiscal year ended December 31, 2005, and in reports subsequently filed by Nano-Proprietary with the Securities and Exchange Commission ("SEC"). All documents are available through the SEC's Electronic Data Gathering Analysis and Retrieval System (EDGAR). Nano-Proprietary hereby disclaims any obligation to publicly update the information provided above, including forward-looking statements, to reflect subsequent events or circumstances.