Ann: Quarterly Activities Report, page-13

A couple of interesting points I've found in re-reading the quarterly:

• "Current inventory held as work-in-progress awaiting Generation 2 systems to continue finishing for delivery to Samsung and others"

We were asking what happened to original samples ready to ship to Samsung from months ago, so this was covered. I was hoping this meant the earlier stock would not be wasted (but see below). Will the Gen 2 furnaces can produce the same quality material or better quality product (as opposed to cheaper production etc)? It would be good to hear more about this in the future...

• "Processing of new precursor materials for lower cost and improved performance with strong performance results validating PUREgraphite processing as flexible to input materials"

Flexible to input materials is interesting - what are they implying here? I know we've covered using different grades of nickel and possibly lithium with DPMG, but is this saying different input material of needle coke for graphite?

• "Samsung and Sanyo will receive materials from Generation 2 furnace systems for mass production qualification after installation and commissioning
• Samsung audit of PUREgraphite plant will now be targeted at Generation 2 furnace systems"

I guess the negative point short term from this is there will be continued delays if we basically have to start again with the Gen 2 stock (assuming I am reading it right) for testing with both Samsung and Sanyo. Again, this may indicate the Gen 1 stock produced may not be used?

• "Continued sampling programs with domestic and international battery manufacturers and automotive OEMs with strong feedback and desire to see demonstrated higher volume production"

Don't we all want to see higher volume production!! It can't come soon enough for many of us! If Chris Burns wants things to happen faster, let's hope they really get stuck into things, with no more delays. An updated timeframe on this changeover and ramp up in the coming months would be much appreciated to give us certainty of progress.

But a positive quarterly - they sound bullish, which is good, but still issues with changing over furnaces and production techniques as well as no upgrade on DPMG and cathode materials - can't wait for this info to come through.