Ann: Appendix 4E - Preliminary Final Report 30 Ju, page-9

re: Ann: Appendix 4E - Preliminary Final Repo... Hello BillOM,

I’m surprised that you were surprised at my curt comment!
To answer your question, No, I was not disappointed, not in the least.
I was ambivalent.
Plus I didn’t have a lot of spare time then to look more closely at the report.

So here are some more comprehensive comments:

Firstly, this is NOT one of the announcements that we are all waiting for.
It is an announcement that is fundamentally out of date, (with some exceptions) because its intention is to inform the market about the state of the company as at the end of the financial year, 30 June 2009.

Secondly, it is a mandatory announcement they had to make, whether there was anything new to report or not, and obviously they really didn’t have anything yet.
In particular, as goinggreen pointed out, this report does indeed confirm that there is no news yet with regard to BLK’s proposed order for the BLK-300.

Having said all that however there is some good information to be gleamed from the report.

Like you, the thing that caught my attention immediately was the addition to their business plan, of manufacturing wafers for direct sale to customers.
You seemed to take this as a negative sign, whereas I saw it as a big plus.

You are right though, in that it is a struggle for BLG to sell the tools to manufacturers.
Selling a new technology to either established players or to new producers was always going to be difficult because the RPCVD process is not yet mature.
It has not yet proven itself as a reliable and profitable piece of kit in a manufacturing environment.
So who will be the first to put millions of dollars on the line to buy one, as well as risk the loss of sales if things don’t pan out as promised?

I still envisage BLK as taking on that role, but there will be some delays before they get their plant built and commissioned, so the inferred question is, will BLG also commence manufacturing locally.
They already have the BLK-300 up and running at Silverwater, so they could quickly ramp up production and sort out any remaining issues with the equipment, and start selling product.
I’ve always felt that, this is a field in which you have to move fairly quickly, or opportunities will be lost, so I think this could be a great step.

In addition, as you pointed out BillOM, any move towards direct production would generate a valuable revenue stream.
And this revenue would be far larger for a single local tool, than for a tool sold to a customer, ie, it will be 100% gross profits rather than just 50% of cost savings.

The net effect of all this would result in a more rapid maturing of the process and consequently a faster acceptance of the technology by prospective customers.

Other thoughts about the report:

The quoted loss figure of $8.4 Million sounds high at first, but that is mostly a book loss, made up of IP impairment and depreciation, so it’s really business as usual.

However, investment in research and development under the Commercial Ready Grant guidelines amounted to $4,099,521 last financial year.
That’s a lot of money to pour into research, and I’m sure we will reap the rewards of that in due course.
Quote: “In particular considerable effort is being directed to the research and development of photovoltaic cells based on the RPCVD technology”

Quote: “None of the initial IP has been discarded or rendered obsolete and no specific items have been diminished in their importance to the commercialisation programme”
The IP continues to be underpinned by a steady stream of patents filed, pending and granted,

More grant revenue still remains to be drawn.

“The LED industry is emerging from a slow growth phase”
“(CAGR) of 16.3% over the next three years”
The field is booming even louder


Hello also to Goinggreen,

I do remember the Canadian university that you queried.
It is Lakehead University, and the reason you have not seen any money from them is that the tool sale was a provisional agreement only.
I understand that this has not progressed because of delays at their end in completing the necessary infrastructure, such as a clean room, etc.
I have no idea if that sale will or will not proceed.

Re’ the time taken to order a tool by BLK.:
It is definitely going to happen.

BLK exists solely to commercialize the RPCVD technology, if they don’t order a tool, they might as well fold up, and that’s not very likely, considering their backing from the government and their parent company.

“Wasted another 60 days” ?

The BLG-300 is not an off the shelf item, ie, place an order, pack and deliver.
I’m sure tool 2 is being fully spec’d and improved by both parties, in order to ensure that will incorporate any new discoveries as well as everything learned from Tool 1.
It will be as refined as they can possibly make it.
After all, it is going to be our showpiece.

Waste of time?
Hardly, I would rather that they take their time and get it right, rather than rush in, so as to please some news hungry investors like us.

So in summary, for a mandatory report with nothing really new to report, it’s not all doom and gloom as a few here see it.

Cheers