Pixie

Hi all,

in response to Pixie's request about the military clarity, I have been in touch with Nick - also covering a few other issues.

Here is the guts of it.


By the end of this half of this calendar year (June 30) the business will be 'burn rate break even' - which means that there will be no NEED to raise capital.

This does not mean that Nick will not raise capital if the business needs it for growth - what it means is exactly what it says - there will be no 'need' to raise capital.

The impression I got is that if Nick feels that the costs associated with shifting house and the building of inventory - which is probably about $3 million - that if that figure is 'felt' by Nick to put the balance sheet under a little pressure - he 'might' do a small raise to cover this. IF it were to happen, the raise would be probably out of Australia (US), but he gave no indication that this would happen.

Again and again, it comes to us that the company does NOT want to dilute - and, if it does - it will be as small as possible and only for growth or strategic reasons, not day to day operational necessity.

Unlike my thinking that Nick and Co. may have changed their minds on listing in NY - I was incorrect ----------- the FULL intention is to list - and, the timing of that listing is ONLY due to market conditions. Nick is ready  to go as soon as Cowen give the green light.
In that instance - depending on timing - there might be NO raise at all for the actual listing. What I gather that means is that if that were soon  - then there may well be a raise attached for the listing - but, if it were say a few months in the future - then there may well (probably) be zero funds raised for the listing at all as the company is likely to be close to a cash positive position.


As to the military and the figure of $2.5 million in this calendar year -

that $2.5 million is ONLY referring to Murdock ----------- it takes NO account of any revenue from the FRACU program.

As to the FRACU part of the $18.5 million - Nick says that it is difficult to tell how much will come in from FRACU this calendar year -- but, if he had to guess - then he would say that maybe $5 million of that will be due to FRACU.

However - he says it does NOT matter whether FRACU revenue this year is 2 mil. or 5 mil or 12 mil ------------ the 18.5 mil. figure stands as locked in - because if FRACU falls to the lower end of revenue this year - then commercial will make up for it. (see note at bottom).

What the hell does that mean? - Well, to me (Pinto) - it means that Nick has a lot more up his sleeve in the commercial side than he has given us to factor in - ie. FAT.

What he did say is that FRACU is done - it is not a matter of how much - it is only a matter of when. FRACU has effectively commenced, sub contract work has been won.

The key message that I take away, is the 18M number is well on track, it's not bound by FRACU, but FRACU is well under way. The biggest message, is that the company will be burn rate break even by, if not before the middle of this year AND if polymers kick in then we are well above our 18M number by the end of calendar year.



Now, as I have stated many times in the past - I would not be at all surprised to see a fat ann. one morning out of the blue to do with polymers. After my conversations with Nick, I feel stronger than ever about that.

None of this, of course means anything to our current shareprice - nor, the near future of the shareprice - there is no secret here that institutions want as cheap a price entry as possible - as do, we all.

It is also no secret that there are people and organisations that will attempt to manipulate a stock - so they can drive that cheaper price.

So - although I feel very strongly positive about the business and the future valuations ------------ I have not a clue about short term movements ------- we may move up - but, equally, we may move south.

I am able to say that end March and Early April - Nick will also be in Australia with Dirk - and, that they will be visiting institutional investors.

There will be a push to rebalance the register - towards instos and away from so much retail.

How this is done - ? Nick believes that there is a better than even chance that instos will buy on market - also, I assume, by crossing stock.

Whatever happens or how it happens - I am not prepared to say which way the price is going to go until those instos are in place -- however, I would certainly have a bet that once they are positioned, and, if we have the year I believe we are going to have ------------- and, of course if a polymer whale surfaces - then, I would say that there is a strong northerly current due.

In am very happy being an investor here - I would not be anywhere near as happy if I called myself a trader.

I hope this helps clarify some things to some of you.

Have a great day all.

Pinto


Note - the military revenue timing is cloudy because of how the military funding works - money is 'appropriated' ----------- the funds have been 'appropriated' - but, it is all in one lump.
ie' - the money is actually done and dusted for us - but, we have 4 military programs going at the present time - and, it appears that we just don't know exactly when we will get paid for what - all we know is the amount for the period - and, that we will get it.

That is my understanding of the process.