Re: Honest Post - What to do with UNXL?

Hawthorne said:

1) reason for getting out of Kodak deal was (a) lower sensor prices did not make economic sense for the Kodak partnership and profit sharing with Kodak.

2) Kodak is continuing InTouch production, testing, etc. UNXL will help Kodak for a few months and if Kodak succeeds commercially, UNXL may get royalty for their InTouch IP.

Now come the next moves.

A) ATML shuts down their XSense because it is not their core business. Their main business is micro controllers with 50% margin. ATML tried to restructure XSense business agreement wit CIT which did not go anywhere. Carclo, parent of CIT, decided to shut down CIT business segment since its carrying cost of $5.3 million did not make economic sense for Carclo.

According to Hawthorne, XSesnse transaction gives UNXL these advantages:

1) immediate roll to roll equipment for commercial production of XSense sensors

2) immediate revenue of at least $10 Million for 2015 and potential profitability in 2016 after they improved the CIT's film technology. Capital expense required is minor.

3) They have already begun the transfer of CIT film production to Colorado ATML plant. The transfer will be completed in six months or earlier. Again no capital expense is expected.

Local production of CIT film cuts down the film cost of $7.9/meter to a low value. Their current film at Kodak plant costs them 75 cents/meter. We do not know what the final cost of XSense film at Colorado will be.

4) they are filling the existing orders and booking revenue.

5) they have a pipeline of 5-10 Tier 1 customers.

6) current products are mainly tablet sensors 7-11 inch range.

7) they talked to current customers and other customers of their own.

8) Their can print 4 micron sensors now. Narrow bezels, no need for touchless plater, etc.

9) In the first six months they plan to integrate XSense technology with InTouch technology, for maximum capacity (four times the current capacity) or $40-50 million revenue in 2016 and well above, say 40% gross margin.

They have current revenue. They have customers with orders to fulfill. That is the upside.

The downside is all the time and expense spent with Kodak on InTouch so far on sensor development were abandoned. ATML abandons their commercial equipment built at a cost of $22-24 million. UNXL abandons their $15 million equipment at Rochester.

With this transaction, Hawthorne moved quickly to commercial production, revenue and pipeline of Tier 1 customers. They quickly grabbed an opportunity. It seems to make business sense for them. Is it good or bad? We shall see.