Ann: Investor Presentation, page-118

Clarification of Revenue Models

I want to address some of the nonsense being posted here in relation to potential revenue and how that is calculated. It seems to me that there are a number of posters who are taking advantage of the ambiguity of revenue figures to sow ** and fear that we somehow have a hard revenue cap and the total potential is somehow not significant.

In the AGM yesterday Coby delivered the most comprehensive explanation yet of the revenue models that Weebit is developing. Thanks to the recording of the AGM that Eltr0n has posted you can listen to this yourself but I wanted to address what I thought were some of the highlights.

License Fees / NRE (from the 1.01 mark on the AGM recording)

Coby highlights that in the normal course of events, when you secure a commercial agreement with a fab, there is a license fee payable, normally up front and in full. There are also likely to be NRE fees in order to support the technology transfer to the fab and preparing it to the specifics of any given fab. He notes however that as they are bringing new technology to market they need to offer more flexible terms and that they are offering licensing fees payable over agreed milestones. This is the case with the payment from DB Hitek and the initial $100k - which implies that there will be further license fee instalments from DB Hitek as milestones are achieved.

To emphasise though - in future they will insist on license fees being paid up front.

Royalties (from the 1.02.30 mark on the AGM recording)

Once a commercial agreement with a fab has been secured, Weebit will need to secure product companies which may be small product companies or they may be very large product companies. Weebit will not have the bandwidth to deal with all of the potential product companies so employ two different models. They will not have a direct relationship with small product companies. This relationship will be managed via the fab. Weebit will however manage the relationship with large product copies directly. The royalties model for these two engagement models will differ.

Indirect Royalties (for small product companies)

A small product company that needs NVM will work with fab to include the Weebit IP (along with whatever other IP they require). The fab will then uplift the price of that wafer to reflect the IP has been included and a percentage of that will be paid to Weebit as royalties.

Important: In this model, ROYALTIES ARE A FUNCTION OF THE WAFER PRICE

Direct Royalties (for large / significant product companies)

For large strategic companies ( and here Coby uses Apple, Broadcom, Google as examples) Weebit will want to work with them directly. This includes the license fees and NRE being paid directly to Weebit from the product company. Once the solution has been designed and the Weebit IP included on their chip then royalties will be paid directly to Weebit from the product company. Whilst Coby did not want to address the complexities of royalties calculation he was 100% clear and unambiguous that this royalty payment is a percentage of their revenue (it is NOT indexed as a percentage of the wafer cost).

Important: In this model, ROYALTIES ARE FUNCTION OF THE PRODUCT REVENUE

This is a very clear articulation of the FACT that we do not have a hard cap or ceiling on our revenues with the embedded product. I don't think this has been well understood at all until this point. Weebit for the win.