Ann: Company Update, page-138

Hi Purple Turtle

Nice bit of work but I think there are a number of problems with your assumptions. I have double checked on the mechanics of the Lenze deal.

The ARDC/RML etc is firmware, required to be on the chip/gateway/platform etc.

The Deb App is essentially software that can be loaded onto existing hardware. This is the basis of the Lenze deal. Remember it came from left field as a result of a request by Lenze, initially to Wenjun, I think, to get their interface fixed as they did not like it. Wenjun indicated that he knew a company that could help with the UI, Xped. Thus the relationship with Lenze started.

So my understanding is that the DeB app will work with all the Lenze products now, NO hardware/chips from Telink or anyone else is required. What they need is the app approved.
They are using the standard ble Bluetooth to connect the device to the Deb app. No change in the device building blocks, just getting the DeB app to pick up and display it better.

Many of the products Lenze currently have do not utilise Telink chips hence I do not think it is a necessary requirement for Lenze to have Telink chips for their current products to make this work.

So when trying to value the Lenze deal there will be a 1 off payment from Lenze (OEM) to Xped and if they use a Telink chip, I am pretty sure there will be NO double dipping, no 17.95% payment from Telink, sorry about that. Remember there is a close link between Lenze and Telink and they would not want to increase the cost of the products unnecessarily as it may impact on their competitiveness, just my opinion.

So if they get the app running and they sell 2 million i-chargers per month, how many will down load the app, 20%, 30%, 70% or 100%, no one knows as yet. What is interesting is how multiple "things" will be treated on the app. If a person has say 3 Lenze products, will it be 3 x $0.15 or just 1 app use @ $0.15, this seems more plausible. This would appear to be a bit of a downside but I suspect that if people have multiple devices then that would encourage them to down load the app, hence I think the take up rate will be a lot higher, maybe closer to 70 to 80%, just my speculation. Hopefully this will become clearer once the app is approved.

So if the above assumptions are correct how do you work out how many of the possible 200 million devices Lenze is projected to sell this year will become "things" on the app. If one guessed at 30 % of the total, looking at the number of multiples that each person may have, even 30% maybe optimistic.

Thus 30% or 200 million "things" is approx 60 million annually or 5 million per month, but it will start small and work upwards.
Thus potential revenue would be 60,000,000 x US$0.15= US$9 million revenue.

I think this could be optimistic, BUT remember $0 from Telink chips.

Once the initial app has been activated and it is working well then Lenze have to make a decision as to whether they wish to maintain the app and keep it up to date or pay an annual maintenance fee to Xped to do it for them. I remember Marty clearly saying that there were a lot of OEM's/ODMs out there that did not have the skills nor the desire to want to do this work, they were quite happy to be given a solution they can use out of the box, unlike the Intel, Microsoft, Googles etc that have massive staff resources and expertise to do this work themselves. I think Lenze is the first of these smaller entities that Marty was referring to.

Hence the yearly maintenance fee for the app would be $0.10 per down load of the app with a yearly potential of US$6 million after the initial 12 months of the deal.

There are other potential sources of income that could flow from this with regards the data that is collected but I don't know if that has even been explored yet, best to get the app approved, hence the critical need for the engineers to get it sorted next week.

This is also a test of Xped's ability to customise the DeB app in the real world and met clients needs and will serve as a template for other customers down the track, demonstrating/showcasing a can do ability.

So I think the moving parts are not as many as you may have thought RR and Purple Turtle, just my thoughts after lots of reading and double checking.

I think it is important for readers to remember that Lenze in itself is a special case, was not planned for and came from left field and does not need ADRC/RML unlike the majority of potential customers that Xped was targeting.

Just my thoughts, sorry if I am a wet blanket for some.

Regards

Rayda