Ann: Quarterly Activities/Appendix 4C Cash Flow Report, page-13

So, what to say to this? Overall I think it is both good news but it also sounds a sobering note (excuse the pun again) re timing.

So, they have done some demos, but we have not specifically been told how they have been received.

"... As detailed previously, the company had successfully produced and commenced demonstrations of both individual and multi-chip systems to a number of potential customers that maintain some relevant expertise in Israel. While our efforts have so far served well as an initial foray to the market, it rapidly became apparent that to advance customer engagement while the world remains under strict COVID-19 travel restrictions, our efforts must be augmented by producing and providing working engineering samples that can be independently assessed by customers, at their facilities. ..."

In other words they were able to do demos of the full 80 chip systems, and presumably got the capabilities of the system across, but they realised that their own expertise and understanding of what the chips could do needed to be shown to attendees, rather than have them explore those capabilities for themselves. This is not at all surprising to me. Having spent many years doing demos of innovative and complex high-tech systems to people who are innately capable of grasping their significance, I have long recognised that the developers tend to be so close to their innovations that they do not always see just just how revolutionary they actually are. This often means those to whom the tech is shown do not always get that same level of amazement at first sight. It takes time, and an opportunity to slowly explore it, or at the very least to be taken through it slowly step by step. Engineers are not thick, but they do need to get their heads around massive innovation to see its importance.

Let's just assume they came in and AP played them the the chip array. It sounded great, as expected. Exactly. As one would expect it made a great sound. But they have undoubtedly heard many high end speaker systems in the past, and they also sounded great. It would not be until the system was fully explained so the way it all worked was made clear, including the tiny size, the low power requirement, the low cost, the fantastic sound specs, and some of the many tricks it can also do, that they would really begin to appreciate its revolutionary nature.

The take home for AP? "We really need to demo this and take the listeners through the whole technology before they "get it". But we cannot do that yet because we cannot go to them or have them come here. That's a problem." Hence the 80 chip demo unit.

1. "... Such an “adjustment” poses significant challenges as it essentially necessitates accelerating production and product commercialization activities (as well as the procurement of capital needed to support such activities). It demands the production of many more devices and systems, as well as the adequate “maturing” of the technology, so that it befittingly and securely can be evaluated independently, at customer sites.

   While many such commercialization activities were already underway, our demonstration systems were originally designed to be operated by our engineers and systems. Pivoting from this approach necessitates expediting a wide range of interdependent and third-party reliant activities, including (but by no means limited to):

- Finalization of product optimization for mass production

- Transitioning MEMS manufacturing and packaging from engineering lines to mass-production lines

- Translation and compilation of source code to embedded firmware, as well as the inclusion of encryption and other IP safeguard methods
- Development and fabrication of independently operated demonstration systems and tools
- Production of self-guiding customer oriented materials (such as reference design kits, functional and application guidelines, operating instructions, and so on.
- An urgent need to bring negotiations to conclusion as to secure both short and long term qualitative and quantitative mass-production requirements in comprehensive signed agreements. ..."

• The chip has to be got to the stage that it can be signed off as "finished" and ready for mass production. It cannot be tinkered with indefinitely. Are we there yet?
• It has to be progressed to the mass production stage in a production FAB. This now becomes an urgent task that has to be done before full promotional activities can be expected to produce the level of initial interest and uptake of the tech.
• The demo systems have to be manufactured and self guided info packs for them to be carefully prepared and trialled, presumably with local interested parties first up.
• Another words the time has come to totally gear up for a successful launch. And that entails significant risks and costs.
• However, everything we have been told is that there are eager prospective customers and investors who will get us through over these hurdles. And we can be very largely confident that the tech is everything that the company, and the chips designers, hoped it would be.

It is to be hoped that we can quickly land at least one credibly prestigious early adopter to launch a product that will impress the market.